HB-4326, As Passed House, April 23, 2015
March 11, 2015, Introduced by Rep. Poleski and referred to the Committee on Financial Liability Reform.
A bill to amend 2012 PA 436, entitled
"Local financial stability and choice act,"
by amending sections 2 and 4 (MCL 141.1542 and 141.1544).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2. As used in this act:
(a) "Chapter 9" means chapter 9 of title 11 of the United
States Code, 11 USC 901 to 946.
(b) "Chief administrative officer" means any of the following:
(i) The manager of a village or, if a village does not employ a
manager, the president of the village.
(ii) The city manager of a city or, if a city does not employ a
city manager, the mayor of the city.
(iii) The manager of a township or the manager or superintendent
of a charter township or, if the township does not employ a manager
or superintendent, the supervisor of the township.
(iv) The elected county executive or appointed county manager
of a county or, if the county has not adopted the provisions of
either 1973 PA 139, MCL 45.551 to 45.573, or 1966 PA 293, MCL
45.501 to 45.521, the county's chairperson of the county board of
commissioners.
(v) The chief operating officer of an authority or of a public
utility owned by a city, village, township, or county.
(vi) The superintendent of a school district.
(c) "Creditor" means either of the following:
(i) An entity that has a noncontingent claim against a local
government that arose at the time of or before the commencement of
the neutral evaluation process and whose claim represents at least
$5,000,000.00 or comprises more than 5% of the local government's
debt or obligations, whichever is less.
(ii) An entity that would have a noncontingent claim against
the local government upon the rejection of an executory contract or
unexpired lease in a chapter 9 case and whose claim would represent
at least $5,000,000.00 or would comprise more than 5% of the local
government's debt or obligations, whichever is less.
(d) "Debtor" means a local government that is authorized to
proceed under chapter 9 by this act and that meets the requirements
of chapter 9.
(e) "Emergency manager" means an emergency manager appointed
under section 9. An emergency manager includes an emergency
financial manager appointed under former 1988 PA 101 or former 1990
PA
72 who was acting in that capacity on the effective date of this
act.March 28, 2013.
(f) "Entity" means a partnership, nonprofit or business
corporation, limited liability company, labor organization, or any
other association, corporation, trust, or other legal entity.
(g) "Financial and operating plan" means a written financial
and operating plan for a local government under section 11,
including an educational plan for a school district.
(h) "Good faith" means participation by an interested party or
a local government representative in the neutral evaluation process
with the intent to negotiate a resolution of the issues that are
the subject of the neutral evaluation process, including the timely
provision of complete and accurate information to provide the
relevant participants through the neutral evaluation process with
sufficient information, in a confidential manner, to negotiate the
readjustment of the local government's debt.
(i) "Interested party" means a trustee, a committee of
creditors, an affected creditor, an indenture trustee, a pension
fund, a bondholder, a union that under its collective bargaining
agreements has standing to initiate contract negotiations with the
local government, or a representative selected by an association of
retired employees of the public entity who receive income or
benefits from the public entity. A local government may invite
holders of contingent claims to participate as interested parties
in the neutral evaluation process if the local government
determines that the contingency is likely to occur and the claim
may represent at least $5,000,000.00 or comprise more than 5% of
the local government's debt or obligations, whichever is less.
(j) "Local emergency financial assistance loan board" means
the local emergency financial assistance loan board created under
section 2 of the emergency municipal loan act, 1980 PA 243, MCL
141.932.
(k) "Local government" means a municipal government or a
school district.
(l) "Local government representative" means the person or
persons designated by the governing body of the local government
with authority to make recommendations and to attend the neutral
evaluation process on behalf of the governing body of the local
government.
(m) "Local inspector" means a certified forensic accountant,
certified public accountant, attorney, or similarly credentialed
person whose responsibility it is to determine the existence of
proper internal and management controls, fraud, criminal activity,
or any other accounting or management deficiencies.
(n) "Municipal government" means a city, a village, a
township, a charter township, a county, a department of county
government if the county has an elected county executive under 1966
PA 293, MCL 45.501 to 45.521, an authority established by law, or a
public utility owned by a city, village, township, or county.
(o) "Neutral evaluation process" means a form of alternative
dispute resolution or mediation between a local government and
interested parties as provided for in section 25.
(p) "Neutral evaluator" means an impartial, unbiased person or
entity, commonly known as a mediator, who assists local governments
and interested parties in reaching their own settlement of issues
under this act, who is not aligned with any party, and who has no
authoritative decision-making power.
(q) "Receivership" means the process under this act by which a
financial emergency is addressed through the appointment of an
emergency manager. Receivership does not include chapter 9 or any
provision under federal bankruptcy law.
(r) "Review team" means a review team appointed under section
4.
(s) "School board" means the governing body of a school
district.
(t) "School district" means a school district as that term is
defined in section 6 of the revised school code, 1976 PA 451, MCL
380.6, or an intermediate school district as that term is defined
in section 4 of the revised school code, 1976 PA 451, MCL 380.4.
(u) "State financial authority" means the following:
(i) For a municipal government, the state treasurer.
(ii) For Except as otherwise provided in subparagraph (iii), for
a school district, the superintendent of public instruction.
(iii) For a school district subject to a deficit elimination
plan under section 1220 of the revised school code, 1976 PA 451,
MCL 380.1220, the state treasurer.
(v) "Strong mayor" means a mayor who has been granted veto
power for any purpose under the charter of that local government.
(w) "Strong mayor approval" means approval of a resolution
under 1 of the following conditions:
(i) The strong mayor approves the resolution.
(ii) The resolution is approved by the governing body with
sufficient votes to override a veto by the strong mayor.
(iii) The strong mayor vetoes the resolution and the governing
body overrides the veto.
Sec.
4. (1) The Subject to
subsection (2), the state financial
authority may conduct a preliminary review to determine the
existence of probable financial stress within a local government if
1 or more of the following occur:
(a) The governing body or the chief administrative officer of
a local government requests a preliminary review. The request shall
be in writing and shall identify the existing or anticipated
financial conditions or events that make the request necessary.
(b) The state financial authority receives a written request
from a creditor with an undisputed claim that remains unpaid 6
months after its due date against the local government that exceeds
the greater of $10,000.00 or 1% of the annual general fund budget
of the local government, provided that the creditor notifies the
local government in writing at least 30 days before his or her
request to the state financial authority of his or her intention to
submit a written request under this subdivision.
(c) The state financial authority receives a petition
containing specific allegations of local government financial
distress signed by a number of registered electors residing within
the local government's jurisdiction equal to not less than 5% of
the total vote cast for all candidates for governor within the
local government's jurisdiction at the last preceding election at
which a governor was elected. Petitions shall not be filed under
this subdivision within 60 days before any election of the local
government.
(d) The state financial authority receives written
notification that a local government has not timely deposited its
minimum obligation payment to the local government pension fund as
required by law.
(e) The state financial authority receives written
notification that the local government has failed for a period of 7
days or more after the scheduled date of payment to pay wages and
salaries or other compensation owed to employees or benefits owed
to retirees.
(f) The state financial authority receives written
notification from a trustee, paying agent, bondholder, or auditor
engaged by the local government of a default in a bond or note
payment or a violation of 1 or more bond or note covenants.
(g) The state financial authority of a local government
receives a resolution from either the senate or the house of
representatives requesting a preliminary review.
(h) The local government has violated a requirement of, or a
condition of an order issued pursuant to, former 1943 PA 202, the
revenue bond act of 1933, 1933 PA 94, MCL 141.101 to 141.140, the
revised municipal finance act, 2001 PA 34, MCL 141.2101 to
141.2821, or any other law governing the issuance of bonds or
notes.
(i) The municipal government has violated the conditions of an
order issued by the local emergency financial assistance loan board
pursuant to the emergency municipal loan act, 1980 PA 243, MCL
141.931 to 141.942.
(j) The local government has violated a requirement of
sections 17 to 20 of the uniform budgeting and accounting act, 1968
PA 2, MCL 141.437 to 141.440.
(k) The local government fails to timely file an annual
financial report or audit that conforms with the minimum procedures
and standards of the state financial authority and is required for
local governments under the uniform budgeting and accounting act,
1968 PA 2, MCL 141.421 to 141.440a, or 1919 PA 71, MCL 21.41 to
21.55.
(l) If the local government is a school district, the school
district fails to provide an annual financial report or audit that
conforms with the minimum procedures and standards of the
superintendent of public instruction and is required under the
revised school code, 1976 PA 451, MCL 380.1 to 380.1852, and the
state school aid act of 1979, 1979 PA 94, MCL 388.1601 to 388.1896.
(m) The municipal government is delinquent in the distribution
of tax revenues, as required by law, that it has collected for
another taxing jurisdiction, and that taxing jurisdiction requests
a preliminary review.
(n) The local government is in breach of its obligations under
a deficit elimination plan or an agreement entered into pursuant to
a deficit elimination plan.
(o) A court has ordered an additional tax levy without the
prior approval of the governing body of the local government.
(p) The municipal government has ended a fiscal year in a
deficit condition as defined in section 21 of the Glenn Steil state
revenue sharing act of 1971, 1971 PA 140, MCL 141.921, or has
failed to comply with the requirements of that section for filing
or instituting a financial plan to correct the deficit condition.
(q) The school district ended its most recently completed
fiscal year with a deficit in 1 or more of its funds and the school
district has not submitted a deficit elimination plan to the state
financial authority within 30 days after the district's deadline
for submission of its annual financial statement.
(r) The local government has been assigned a long-term debt
rating within or below the BBB category or its equivalent by 1 or
more nationally recognized credit rating agencies.
(s) The existence of other facts or circumstances that, in the
state treasurer's sole discretion for a municipal government, are
indicative of probable financial stress or that, in the state
treasurer's or superintendent of public instruction's sole
discretion for a school district, are indicative of probable
financial stress.
(2) If 1 or more of the following occur, the state financial
authority of the school district shall conduct a preliminary review
to determine the existence of probable financial stress within the
school district:
(a) The school district is subject to a deficit elimination
plan under section 1220 of the revised school code, 1976 PA 451,
MCL 380.1220, and the state treasurer determines that the school
district has failed to submit or materially comply with the
requirements of the deficit elimination plan.
(b) The school district is subject to a deficit elimination
plan under section 1220 of the revised school code, 1976 PA 451,
MCL 380.1220, that provides for the elimination of deficit over a
period exceeding 5 years.
(3) (2)
Before commencing the preliminary
review under
subsection (1) or (2), the state financial authority shall provide
the local government specific written notification that it intends
to conduct a preliminary review. Elected and appointed officials of
a local government shall promptly and fully provide the assistance
and information requested by the state financial authority for that
local government in conducting the preliminary review. The state
financial authority shall provide an interim report of its findings
to the local government within 20 days following the commencement
of the preliminary review. In addition, a copy of the interim
report shall be provided to each state senator and state
representative who represents that local government. The local
government may provide comments to the state financial authority
concerning the interim report within 5 days after the interim
report is provided to the local government. The state financial
authority shall prepare and provide a final report detailing its
preliminary review to the local emergency financial assistance loan
board. In addition, a copy of the final report shall be provided to
each state senator and state representative who represents that
local government. The final report shall be posted on the
department of treasury's website within 7 days after the final
report is provided to the local emergency financial assistance loan
board. The preliminary review and final report by the state
financial authority shall be completed within 30 days following
commencement of the preliminary review. For a preliminary review
conducted under subsection (2), if the final report prepared by the
state financial authority confirms the existence of any of the
factors provided in subsection (2)(a) or (b), the state financial
authority's confirmation is prima facie evidence that probable
financial stress exists for that school district. Within 20 days
after receiving the final report from the state financial
authority, the local emergency financial assistance loan board
shall determine if probable financial stress exists for the local
government.
(4) (3)
If a finding of probable financial
stress is made for
a municipal government by the local emergency financial assistance
loan
board under subsection (2), (3),
the governor shall appoint a
review team for that municipal government consisting of the state
treasurer or his or her designee, the director of the department of
technology, management, and budget or his or her designee, a
nominee of the senate majority leader, and a nominee of the speaker
of the house of representatives. The governor may appoint other
state officials or other persons with relevant professional
experience to serve on a review team to undertake a municipal
financial management review.
(5) (4)
If a finding of probable financial
stress is made for
a school district by the local emergency financial assistance loan
board
under subsection (2), (3),
the governor shall appoint a
review team for that school district consisting of the state
treasurer or his or her designee, the superintendent of public
instruction or his or her designee, the director of the department
of technology, management, and budget or his or her designee, a
nominee of the senate majority leader, and a nominee of the speaker
of the house of representatives. The governor may appoint other
state officials or other persons with relevant professional
experience to serve on a review team to undertake a school district
financial management review.
(6) (5)
The department of treasury shall
provide staff support
to each review team appointed under this section.
(7) (6)
A review team appointed under
former 1988 PA 101 or
former
1990 PA 72 and serving immediately prior to the effective
date
of this act before March 28,
2013 shall continue under this
act to fulfill its powers and duties. All proceedings and actions
taken by the governor, the state treasurer, the superintendent of
public instruction, the local emergency financial assistance loan
board, or a review team under former 2011 PA 4, former 1988 PA 101,
or
former 1990 PA 72 before the effective date of this act March
28, 2013 are ratified and are enforceable as if the proceedings and
actions were taken under this act, and a consent agreement entered
into under former 2011 PA 4, former 1988 PA 101, or former 1990 PA
72
that was in effect immediately prior to the effective date of
this
act before March 28, 2013 is ratified and is binding and
enforceable under this act.
Enacting section 1. This amendatory act takes effect 90 days
after the date it is enacted into law.