HB-4214, As Passed House, March 16, 2011

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4214

A bill to safeguard and assure the fiscal accountability of

units of local government, including school districts; to preserve

the capacity of units of local government to provide or cause to be

provided necessary services essential to the public health, safety,

and welfare; to provide for review, management, planning, and

control of the financial operation of units of local government and

the provision of services by units of local government, including

school districts; to provide criteria to be used in determining the

financial condition of units of local government, including school

districts; to permit a declaration of the existence of a local

government financial emergency and to prescribe the powers and

duties of the governor, other state departments, boards, agencies,

officials, and employees, and officials and employees of units of

local government, including school districts; to provide for

placing units of local government, including school districts, into

receivership; to provide for a review and appeal process; to

provide for the appointment and to prescribe the powers and duties

of an emergency manager; to require the development of financial

and operational plans to regulate expenditures, investments, and

the provision of services by units of local government, including

school districts, in a state of financial stress or financial

emergency; to provide for the modification or termination of

contracts under certain circumstances; to set forth the conditions

for termination of a local government financial emergency; and to

repeal acts and parts of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the "local

government and school district fiscal accountability act".

Sec. 3. The legislature hereby determines that the health,

safety, and welfare of the citizens of this state would be

materially and adversely affected by the insolvency of local

governments and that the fiscal accountability of local governments

is vitally necessary to the interests of the citizens of this state

to assure the provision of necessary governmental services

essential to public health, safety, and welfare. The legislature

further determines that it is vitally necessary to protect the

credit of this state and its political subdivisions and that it is

necessary for the public good and it is a valid public purpose for

this state to take action and to assist a local government in a

condition of financial stress or financial emergency so as to

remedy the stress or emergency by requiring prudent fiscal

management and efficient provision of services, permitting the

restructuring of contractual obligations, and prescribing the

powers and duties of state and local government officials and

emergency managers. The legislature, therefore, determines that the

authority and powers conferred by this act constitute a necessary

program and serve a valid public purpose.

Sec. 5. As used in this act:

(a) "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.

(b) "Emergency manager" or "manager" means the emergency

manager appointed under section 15. An emergency manager includes

House Bill No. 4214 as amended March 9, 2011

an emergency financial manager appointed under former 1988 PA 101

or former 1990 PA 72.

<<(c) "Entity" means a partnership, nonprofit or business

corporation, limited liability company, labor organization, or any

other association, corporation, trust, or other legal entity.

(d) "Financial and operating plan" means a written financial and operating plan for a local government under section 18, including an academic and educational plan for a school district.

(e)>> "Local government" means a municipal government or a

school district.

<<(f)>> "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.

<<(g)>> "Municipal government" means a city, a village, a

township, a charter township, a county, an authority established by

law, or a public utility owned by a city, village, township, or

county.

<<(h)>> "Review team" means a review team designated under section

12.

<<(i)>> "School board" means the governing body of a school

district.

<<(j)>> "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.

<<(k)>> "State financial authority" means the following:

(i) For a municipal government, the state treasurer.

(ii) For a school district, the superintendent of public

instruction.

Sec. 12. (1) The state financial authority of a local

government may conduct a preliminary review to determine the

existence of a local government financial problem 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 under this act.

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.

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 under this section.

(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) A 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

House Bill No. 4214 as amended March 9, 2011

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. In addition, 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 <<

>> 1979 PA 94, MCL 388.1601 to 388.1772.

(l) A 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.

(m) A local government is in breach of its obligations under a

deficit elimination plan or an agreement entered into pursuant to a

deficit elimination plan.

(n) A court has ordered an additional tax levy without the

prior approval of the governing body of the local government.

(o) A 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.

(p) A 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.

(q) A 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.

(r) The existence of other facts or circumstances that in the

state treasurer's sole discretion for a municipal government are

indicative of municipal financial stress, or, that in the

superintendent of public instruction's sole discretion for a school

district are indicative of school district financial stress.

(2) If the state financial authority determines that a

preliminary review is appropriate under this section, before

commencing the preliminary review the state financial authority

shall give the local government specific written notification of

the review. The preliminary review shall be completed within 30

days following its commencement. 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.

(3) If a finding of probable financial stress is made for a

municipal government under subsection (2), 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.

(4) If a finding of probable financial stress is made for a

school district under subsection (2), 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.

(5) The department of treasury shall provide staff support to

each review team.

(6) A review team appointed under former 1988 PA 101 or former

1990 PA 72 and serving on the effective date of this act shall

continue under this act to fulfill their powers and duties. All

proceedings and actions taken by the governor, the state treasurer,

or a review team under former 1988 PA 101 or former 1990 PA 72

before the effective date of this act are ratified and are

enforceable as if the proceedings and actions were taken under this

act, and a consent agreement entered into under former 1988 PA 101

or former 1990 PA 72 is ratified and is binding and enforceable

under this act.

Sec. 13. (1) The review team shall have full power in its

review to perform all of the following functions:

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(a) Examine the books and records of the local government.

(b) Utilize the services of other state agencies and

employees.

administrative officer of the local government. The consent

agreement may provide for remedial measures considered necessary to

address the local financial problem and provide for the financial

stability of the local government and may include either a

continuing operations plan or recovery plan as described in section

14a. The consent agreement may utilize state financial management

and technical assistance as necessary in order to alleviate the

local financial problem. The consent agreement shall also provide

for periodic financial status reports to the state financial

authority. In order for the consent agreement to go into effect, it

shall be approved, by resolution, by the governing body of the

local government and shall be approved and executed by the state

financial authority. A consent agreement shall provide that in the

event of a material uncured breach of the consent agreement, the

state treasurer<<

>> is

authorized to place the local government in receivership as

provided under section 15.

(2) The review team shall meet with the local government as

part of its review. At this meeting, the review team shall receive,

discuss, and consider information provided by the local government

concerning the financial condition of the local government.

(3) The review team shall report its findings to the governor,

with a copy to the state financial authority, within 60 days

following the appointment of the review team under section 12 or

earlier if required by the governor. Upon request, the governor may

grant one 30-day extension of this 60-day time limit. A copy of the

report shall be forwarded by the state treasurer to the chief

administrative officer and the governing body of the local

government, the speaker of the house of representatives, the senate

majority leader, and the superintendent of public instruction if

the local government is a school district. The report shall include

the existence, or an indication of the likely occurrence, of any of

the following:

(a) A default in the payment of principal or interest upon

bonded obligations, notes, or other municipal securities for which

no funds or insufficient funds are on hand and, if required,

segregated in a special trust fund.

(b) Failure for a period of 30 days or more beyond the due

date to transfer 1 or more of the following to the appropriate

agency:

(i) Taxes withheld on the income of employees.

(ii) For a municipal government, taxes collected by the

municipal government as agent for another governmental unit, school

district, or other entity or taxing authority.

(iii) Any contribution required by a pension, retirement, or

benefit plan.

date of payment to pay wages and salaries or other compensation

owed to employees or benefits owed to retirees.

(d) The total amount of accounts payable for the current

fiscal year, as determined by the state financial authority's

uniform chart of accounts, is in excess of 10% of the total

expenditures of the local government in that fiscal year.

(e) Failure to eliminate an existing deficit in any fund of

the local government within the 2-year period preceding the end of

the local government's fiscal year during which the review team

report is received.

(f) Projection of a deficit in the general fund of the local

government for the current fiscal year in excess of 5% of the

budgeted revenues for the general fund.

(g) Failure to comply in all material respects with the terms

of an approved deficit elimination plan or an agreement entered

into pursuant to a deficit elimination plan.

(h) Existence of material loans to the general fund from other

local government funds that are not regularly settled between the

funds or that are increasing in scope.

(i) Existence after the close of the fiscal year of material

recurring unbudgeted subsidies from the general fund to other major

funds as defined under government accounting standards board

principles.

(j) Existence of a structural operating deficit.

(k) Use of restricted revenues for purposes not authorized by

law.

(l) Any other facts and circumstances indicative of local

government financial stress or financial emergency.

(4) The review team shall include 1 of the following

conclusions in its report:

(a) The local government is not in financial stress or is in a

condition of mild financial stress as provided in section 14.

(b) The local government is in a condition of severe financial

stress as provided in section 14, but a consent agreement

containing a plan to resolve the problem has been adopted pursuant

to subsection (1)(c).

stress as provided in section 14, and a consent agreement has not

been adopted pursuant to subsection (1)(c).

(d) A financial emergency exists as provided in section 14 and

no satisfactory plan exists to resolve the emergency.

(5) The review team may, with the approval of the state

financial authority, appoint an individual or firm to carry out the

review and submit a report to the review team for approval. The

department of treasury may enter into a contract with the

individual or firm respecting the terms and conditions of the

appointment.

Sec. 14. (1) For purposes of this act, a local government is

considered to be in a condition of no financial stress or mild

financial stress if the report required in section 13 concludes

that none of the factors in section 13(3) exist or are likely to

occur within the current or next succeeding fiscal year or, if they

occur, do not threaten the local government's capability to provide

necessary governmental services essential to public health, safety,

and welfare.

(2) For purposes of this act, a local government is considered

to be in a condition of severe financial stress if either of the

following occurs:

(a) The report required in section 13 concludes that 1 or more

of the factors in section 13(3) exist or are likely to occur within

the current or next succeeding fiscal year and, if left

unaddressed, may threaten the local government's future capability

to provide necessary governmental services essential to the public

health, safety, and welfare.

(b) The chief administrative officer of the local government

recommends that the local government be considered in severe

financial stress.

(3) For purposes of this act, a local government is considered

to be in a condition of financial emergency if any of the following

occur:

(a) The report required in section 13 concludes that 2 or more

of the factors in section 13(3) exist or are likely to occur within

the current fiscal year and threaten the local government's current

and future capability to provide necessary governmental services

essential to the public health, safety, and welfare.

(b) The local government has failed to provide timely and

accurate information enabling the review team to complete its

report under section 13.

respects with a continuing operations plan or recovery plan, as

provided in section 14a, or with the terms of an approved deficit

elimination plan or an agreement entered into pursuant to a deficit

elimination plan.

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(d) The local government is in material breach of a consent

agreement entered into under section 13(1)(c).

(e) The local government is in a condition of severe financial

stress as provided in subsection (2), and a consent agreement has

not been adopted pursuant to section 13(1)(c).

(f) The chief administrative officer of the local government,

based upon the existence or likely occurrence of 1 or more of the

factors in section 13(3), recommends that a financial emergency be

declared and the state treasurer<<

>> concurs with the recommendation.

Sec. 14a. (1) A consent agreement as provided in section

13(1)(c) may require a continuing operations plan or a recovery

plan if required by the state financial authority.

(2) If the state treasurer<<

>> requires that a consent agreement include a

continuing operations plan, the local government shall prepare and

file the continuing operations plan with the state <<treasurer

>> as provided for in the consent agreement. The state

financial authority shall approve or reject the initial continuing

operations plan within 14 days of receiving it from the local

government. If a plan is rejected, the local government shall

refile an amended plan within 30 days of the rejection addressing

any concerns raised by the state financial authority. If the

amended plan is rejected, then the local government is considered

to be in material breach of the consent agreement. The local

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government is required to file annual updates to its continuing

operations plan. The annual updates shall be included with the

annual filing of the local government's audit report with the state

financial authority as long as the continuing operations plan

remains in effect.

(3) The continuing operations plan shall be in a form

prescribed by the state financial authority, but shall, at a

minimum, include all of the following:

(a) A detailed projected budget of revenues and expenditures

over not less than 3 fiscal years which demonstrates that the local

government's expenditures will not exceed its revenues and that any

existing deficits will be eliminated during the projected budget

period.

(b) A cash flow projection for the budget period.

<<fiscal accountability>> for the local government.

(d) A plan showing reasonable and necessary maintenance and

capital expenditures so as to assure the local government's

<<fiscal accountability>>.

(e) An evaluation of the costs associated with pension and

postemployment health care obligations for which the local

government is responsible and a plan for how those costs will be

addressed within the budget period.

(f) A provision for submitting quarterly compliance reports to

the state financial authority demonstrating compliance with the

continuing operations plan.

(4) If a continuing operations plan is approved for a

municipal government, the municipal government shall amend the

budget and general appropriations ordinance adopted by the

municipal government under the uniform budgeting and accounting

act, 1968 PA 2, MCL 141.421 to 141.440a, to the extent necessary or

advisable to give full effect to the continuing operations plan. If

a continuing operations plan is approved for a school district, the

school district shall amend the budget adopted by the school

district under the uniform budgeting and accounting act, 1968 PA 2,

MCL 141.421 to 141.440a, to the extent necessary or advisable to

give full effect to the continuing operations plan. The chief

administrative officer, the chief financial officer, the governing

body, and other officials of the local government shall take and

direct such actions as may be necessary or advisable to maintain

the local government's operations in compliance with the continuing

operations plan.

(5) If the state financial authority requires that a consent

agreement include a recovery plan, the state financial authority

shall develop and adopt, in consultation with the review team if

desired by the state financial authority, a recovery plan. If a

recovery plan is developed and adopted for the local government,

the local government thereafter is required to file annual updates

to its recovery plan. The annual updates shall be included with the

annual filing of the local government's audit report with the state

financial authority as long as the recovery plan remains in effect.

(6) A recovery plan may include terms and provisions as may be

approved in the discretion of the state treasurer, including, but

not limited to, any 1 or more of the following:

House Bill No. 4214 as amended March 9, 2011

(a) A detailed projected budget of revenues and expenditures

over not less than 3 fiscal years which demonstrates that the local

government's expenditures will not exceed its revenues and that any

existing deficits will be eliminated during the projected budget

period.

(b) A cash flow projection for the budget period.

<<fiscal accountability>> for the local government.

(d) A plan showing reasonable and necessary maintenance and

capital expenditures so as to assure the local government's

<<fiscal accountability>>.

(e) An evaluation of costs associated with pension and

postemployment health care obligations for which the local

government is responsible and a plan for how those costs will be

addressed to assure that current obligations are met and that steps

are taken to reduce future unfunded obligations.

(f) Procedures for cash control and cash management,

including, but not limited to, procedures for timely collection,

securing, depositing, balancing, and expending of cash, and may

include the designation of appropriate fiduciaries.

(g) A provision for submitting quarterly compliance reports to

the state financial authority and the chief administrative officer

of the local government that demonstrates compliance with the

recovery plan.

(7) The recovery plan may include the appointment of a local

auditor or local inspector, or both, in accordance with section

19(1)(p).

(8) If a recovery plan is developed and adopted by the state

financial authority for a local government, the recovery plan shall

supersede the budget and general appropriations ordinance adopted

by the local government under the uniform budgeting and accounting

act, 1968 PA 2, MCL 141.421 to 141.440a, and the budget and general

appropriations ordinance is considered amended to the extent

necessary or advisable to give full effect to the recovery plan. In

the event of any inconsistency between the recovery plan and the

budget or general appropriations ordinance, the recovery plan shall

control. The chief administrative officer, the chief financial

officer, the governing body, and other officers of the local

government shall take and direct actions as may be necessary or

advisable to bring and maintain the local government's operations

in compliance with the recovery plan.

(9) Except as otherwise provided in this subsection, the

consent agreement may include a grant to the chief administrative

officer, the chief financial officer, the governing body, or other

officers of the local government by the state treasurer of 1 or

more of the powers prescribed for emergency managers in section 19

for such periods and upon such terms and conditions as the state

treasurer considers necessary or convenient, in the state

treasurer's discretion to enable the local government to achieve

the goals and objectives of the consent agreement. However, the

consent agreement shall not include a grant to the chief

administrative officer, the chief financial officer, the governing

body, or other officers of the local government of the powers

prescribed for emergency managers in section 19(1)(k).

(10) Unless the state treasurer determines otherwise,

beginning 30 days after the date a local government enters into a

consent agreement under this act, that local government is not

subject to section 15(1) of 1947 PA 336, MCL 423.215, for the

remaining term of the consent agreement.

(11) The consent agreement may provide for the required

retention by the local government of a consultant for the purpose

of assisting the local government to achieve the goals and

objectives of the consent agreement.

(12) A local government is released from the requirements

under this section upon compliance with the consent agreement as

determined by the state financial authority.

Sec. 15. (1) Within 10 days after receipt of the report

provided for in section 13, the governor shall make 1 of the

following determinations:

(a) The local government is not in a condition of severe

financial stress.

(b) The local government is in a condition of severe financial

stress as provided in section 14, but a consent agreement

containing a plan to resolve the financial stress has been adopted

under this act.

as provided in section 14 and no satisfactory plan exists to

resolve the emergency.

(d) The local government entered into a consent agreement

containing a continuing operations plan or recovery plan to resolve

a financial problem, but materially breached that consent

agreement.

(2) If the governor determines pursuant to subsection (1) that

a financial emergency exists, the governor shall provide the

governing body and chief administrative officer of the local

government with a written notification of the determination,

findings of fact utilized as the basis upon which this

determination was made, a concise and explicit statement of the

underlying facts supporting the factual findings, and notice that

the chief administrative officer or the governing body of the local

government has 7 days after the date of the notification to request

a hearing conducted by the state financial authority or the state

financial authority's designee. Following the hearing, or if no

hearing is requested following the expiration of the deadline by

which a hearing may be requested, the governor, in his or her sole

discretion based upon the record, shall either confirm or revoke,

in writing, the determination of the existence of a financial

emergency. If confirmed, the governor shall provide a written

report to the governing body and chief administrative officer of

the local government of the findings of fact of the continuing or

newly developed conditions or events providing a basis for the

confirmation of a financial emergency, and a concise and explicit

statement of the underlying facts supporting these factual

findings.

(3) A local government for which a financial emergency

determination under this section has been confirmed to exist may,

by resolution adopted by a vote of 2/3 of the members of its

governing body elected and serving, appeal this determination

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within 10 business days to the Ingham county circuit court. The

court shall not set aside a determination of financial emergency by

the governor unless it finds that the determination is either of

the following:

(a) Not supported by competent, material, and substantial

evidence on the whole record.

(b) Arbitrary, capricious, or clearly an abuse or unwarranted

exercise of discretion.

(4) Upon the confirmation of a finding of a financial

emergency, the governor shall declare the local government in

receivership and shall appoint an emergency manager to act for and

in the place and stead of the governing body and the office of

chief administrative officer of the local government. The emergency

manager shall have broad powers in receivership to rectify the

financial emergency and to <<assure the fiscal accountability of the

local government and>> the local government's capacity

to provide <<or cause to be provided>> necessary governmental services

essential to the public

health, safety, and welfare. Upon the declaration of receivership

and during the pendency of receivership, the governing body and the

chief administrative officer of the local government may not

exercise any of the powers of those offices except as may be

specifically authorized in writing by the emergency manager and are

subject to any conditions required by the emergency manager.

(5) All of the following apply to an emergency manager:

(a) The emergency manager shall have a minimum of 5 years'

experience and demonstrable expertise in business, financial, or

local or state budgetary matters.

(b) The emergency manager may but need not be a resident of

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the local government.

(d) Except as otherwise provided in this subdivision, the

emergency manager shall serve at the pleasure of the governor. An

emergency manager is <<subject to impeachment and conviction by

the legislature as if he or she were a civil officer under section 7 of

article XI of the state constitution of 1963.

A vacancy in the office of emergency manager

shall be filled in the same manner as the original appointment.>>

(e) The emergency manager's compensation and reimbursement for

actual and necessary expenses shall be paid by the local government

and shall be set forth in a contract approved by the state

treasurer. The contract shall be posted on the department of

treasury's website within 7 days after the contract is approved by

the state treasurer.

(6) In addition to staff otherwise authorized by law, an

emergency manager shall appoint additional staff and secure

professional assistance as the emergency manager considers

necessary to fulfill his or her appointment.

(7) The emergency manager shall make quarterly reports to the

state treasurer with respect to the financial condition of the

local government in receivership, with a copy to the superintendent

of public instruction if the local government is a school district.

(8) The emergency manager shall continue in the capacity of an

emergency manager as follows:

(a) Until removed by the governor or the legislature as

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provided in subsection (5)(d). If an emergency manager is removed

pursuant to this subdivision, the governor shall within 30 days of

the removal appoint a new emergency manager.

(b) Until the financial emergency is rectified.

(9) A local government shall be removed from receivership when

the financial conditions are corrected in a sustainable fashion as

determined by the state treasurer in accordance with this act.

(10) The governor may delegate his or her duties under this

section to the state treasurer.

<<Sec. 15a. Notwithstanding section 3(1) of 1968 PA 317, MCL 15.323, an emergency manager appointed under this act or former 1988 PA 101 or former 1990 PA 72 is subject to all of the following:

(a) 1968 PA 317, MCL 15.321 to 15.330, as a public servant.

(b) 1973 PA 196, MCL 15.341 to 15.348, as a public officer.

Sec. 16. An emergency financial manager appointed under former

1988 PA 101 or former 1990 PA 72, and serving on the effective date

of this act, shall continue under this act to fulfill his or her

powers and duties.

Sec. 17. (1) The emergency manager shall issue to the

appropriate local elected and appointed officials and employees,

agents, and contractors of the local government the orders the

manager considers necessary to accomplish the purposes of this act,

including, but not limited to, orders for the timely and

satisfactory implementation of a financial and operating plan

developed pursuant to section 18, including an academic <<and>>

educational plan for a school district, or to take actions, or

refrain from taking actions, to enable the orderly accomplishment

of the financial and operating plan. An order issued under this

section is binding on the local elected and appointed officials and

employees, agents, and contractors of the local government to whom

it is issued. Local elected and appointed officials and employees,

agents, and contractors of the local government shall take and

House Bill No. 4214 as amended March 9, 2011

direct those actions that are necessary and advisable to maintain

compliance with the financial and operating plan.

(2) If an order of the emergency manager under subsection (1)

is not reasonably carried out and the failure to carry out an order

is disrupting the emergency manager's ability to manage the local

government, the emergency manager, in addition to other remedies

provided in this act, may prohibit the local elected or appointed

official or employee, agent, or contractor of the local government

from access to the local government's office facilities, electronic

mail, and internal information systems.

Sec. 18. (1) The emergency manager shall develop and may amend

a written financial and operating plan for the local government.

The plan shall have the objectives of assuring that the local

government is able to provide necessary <<or cause to be provided>>

governmental services

essential to the public health, safety, and welfare <<

>> and <<assuring>> the fiscal accountability of

the local government. The financial and operating plan shall

provide for all of the following:

(a) Conducting all aspects of the operations of the local

government within the resources available according to the

emergency manager's revenue estimate.

(b) The payment in full of the scheduled debt service

requirements on all bonds, notes, and municipal securities of the

local government and all other uncontested legal obligations.

renegotiation of contracts pursuant to section 19.

(d) The timely deposit of required payments to the pension

House Bill No. 4214 as amended March 9, 2011

fund for the local government or in which the local government

participates.

(e) For school districts, an academic <<and>> educational

plan.

(f) Any other actions considered necessary by the emergency

manager in the emergency manager's discretion to achieve the

objectives of the financial and operating plan, alleviate the

financial emergency, and remove the local government from

receivership.

(2) Within 45 days after the emergency manager's appointment,

the emergency manager shall submit the financial and operating plan

to the state treasurer, with a copy to the superintendent of public

instruction if the local government is a school district, and to

the chief administrative officer and governing body of the local

government. The plan shall be regularly reexamined by the emergency

manager and the state treasurer and may be modified from time to

time by the emergency manager with notice to the state treasurer.

If the emergency manager reduces his or her revenue estimates, the

emergency manager shall modify the plan to conform to the revised

revenue estimates.

(3) The financial and operating plan shall be in a form as

provided by the state treasurer and shall contain that information

for each year during which year the plan is in effect that the

emergency manager, in consultation with the state financial

authority, specifies. The financial and operating plan may serve as

a deficit elimination plan otherwise required by law if so approved

by the state financial authority.

(4) The emergency manager, within 30 days of submitting the

financial and operating plan to the state financial authority,

shall conduct a public informational meeting on the plan and any

modifications to the plan. This subsection does not mean that the

emergency manager must receive public approval before he or she

implements the plan or any modification of the plan.

Sec. 19. (1) An emergency manager may take 1 or more of the

following additional actions with respect to a local government

which is in receivership, notwithstanding any charter provision to

the contrary:

(a) Analyze factors and circumstances contributing to the

financial emergency of the local government and initiate steps to

correct the condition.

(b) Amend, revise, approve, or disapprove the budget of the

local government, and limit the total amount appropriated or

expended.

federal, state, and local funds earmarked for the local government.

These funds may include, but are not limited to, funds for specific

programs and the retirement of debt.

(d) Require and approve or disapprove, or amend or revise a

plan for paying all outstanding obligations of the local

government.

(e) Require and prescribe the form of special reports to be

made by the finance officer of the local government to its

governing body, the creditors of the local government, the

emergency manager, or the public.

(f) Examine all records and books of account, and require

under the procedures of 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, or both, the attendance of witnesses and the production of

books, papers, contracts, and other documents relevant to an

analysis of the financial condition of the local government.

(g) Make, approve, or disapprove any appropriation, contract,

expenditure, or loan, the creation of any new position, or the

filling of any vacancy in a position by any appointing authority.

(h) Review payrolls or other claims against the local

government before payment.

(i) Notwithstanding any minimum staffing level requirement

established by charter or contract, establish and implement

staffing levels for the local government.

(j) Reject, modify, or terminate 1 or more terms and

conditions of an existing contract.

(k) After meeting and conferring with the appropriate

bargaining representative and, if in the emergency manager's sole

discretion and judgment, a prompt and satisfactory resolution is

unlikely to be obtained, reject, modify, or terminate 1 or more

terms and conditions of an existing collective bargaining

agreement. The rejection, modification, or termination of 1 or more

terms and conditions of an existing collective bargaining agreement

under this subdivision is a legitimate exercise of the state's

sovereign powers if the emergency manager and state treasurer

determine that all of the following conditions are satisfied:

(i) The financial emergency in the local government has created

a circumstance in which it is reasonable and necessary for the

state to intercede to serve a significant and legitimate public

purpose.

(ii) Any plan involving the rejection, modification, or

termination of 1 or more terms and conditions of an existing

collective bargaining agreement is reasonable and necessary to deal

with a broad, generalized economic problem.

(iii) Any plan involving the rejection, modification, or

termination of 1 or more terms and conditions of an existing

collective bargaining agreement is directly related to and designed

to address the financial emergency for the benefit of the public as

a whole.

(iv) Any plan involving the rejection, modification, or

termination of 1 or more terms and conditions of an existing

collective bargaining agreement is temporary and does not target

specific classes of employees.

(l) Act as sole agent of the local government in collective

bargaining with employees or representatives and approve any

contract or agreement.

(m) If a municipal government's pension fund is not

actuarially funded at a level of 80% or more, according to the most

recent governmental accounting standards board's applicable

standards, at the time the most recent comprehensive annual

financial report for the municipal government or its pension fund

was due, the emergency manager may remove 1 or more of the serving

trustees of the local pension board or, if the state treasurer

appoints the emergency manager as the sole trustee of the local

pension board, replace all the serving trustees of the local

pension board. For the purpose of determining the pension fund

level under this subdivision, the valuation shall exclude the net

value of pension bonds or evidence of indebtedness. The annual

actuarial valuation for the municipal government's pension fund

shall use the actuarial accrued liabilities and the actuarial value

of assets. If a pension fund uses the aggregate actuarial cost

method or a method involving a frozen accrued liability, the

retirement system actuary shall use the entry age normal actuarial

cost method. If the emergency manager serves as sole trustee of the

local pension board, all of the following apply:

(i) The emergency manager shall assume and exercise the

authority and fiduciary responsibilities of the local pension

board, including to the extent applicable, setting and approval of

all actuarial assumptions for pension obligations of a municipal

government to the local pension fund.

(ii) The emergency manager shall fully comply with the public

employee retirement system investment act, 1965 PA 314, MCL 38.1132

to 38.1140m, and section 24 of article IX of the state constitution

of 1963, and any actions taken shall be consistent with the pension

fund's qualified plan status under the federal internal revenue

code.

(iii) The emergency manager shall not make changes to a local

pension fund without identifying the changes and the costs and

benefits associated with the changes and receiving the state

treasurer's approval for the changes. If a change includes the

transfer of funds from 1 pension fund to another pension fund, the

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valuation of the pension fund receiving the transfer must be

actuarially funded at a level of 80% or more, according to the most

recent governmental accounting standards board's applicable

standards, at the time the most recent comprehensive annual

financial report for the municipal government was due.

<<(iv) The emergency manager's assumption and exercise of the authority and fiduciary responsibilities of the local pension board shall end not later than the termination of the receivership of the municipal government as provided in this act.>>

(n) Consolidate or eliminate departments of the local

government or transfer functions from 1 department to another and

appoint, supervise, and, at his or her discretion, remove

administrators, including heads of departments other than elected

officials.

(o) Employ or contract for, at the expense of the local

government and with the approval of the state financial authority,

auditors and other technical personnel considered necessary to

implement this act.

(p) Retain 1 or more persons or firms, which may be an

individual or firm selected from a list approved by the state

treasurer, to perform the duties of a local inspector or a local

auditor as described in this subdivision. The duties of a local

inspector are to assure integrity, economy, efficiency, and

effectiveness in the operations of the local government by

conducting meaningful and accurate investigations and forensic

audits, and to detect and deter waste, fraud, and abuse. At least

annually, a report of the local inspector shall be submitted to the

emergency manager, the state treasurer, and the superintendent of

public instruction if the local government is a school district.

The duties of a local auditor are to assure that internal controls

over local government operations are designed and operating

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effectively to mitigate risks that hamper the achievement of the

emergency manager's financial plan, assure that local government

operations are effective and efficient, assure that financial

information is accurate, reliable, and timely, comply with

policies, regulations, and applicable laws, and assure assets are

properly <<managed>>. At least annually, a report of the local

auditor shall be submitted to the emergency manager, the state

treasurer, and the superintendent of public instruction if the

local government is a school district.

(q) An emergency manager may initiate court proceedings in

Ingham county circuit court in the name of the local government to

enforce compliance with any of his or her orders or any

constitutional or legislative mandates, or to restrain violations

of any constitutional or legislative power of his or her orders.

<<(r) If provided in the financial and operating plan, or

otherwise with the prior written approval of the governor or his or

her designee, sell, lease, convey, assign, or otherwise use or transfer

the assets, liabilities, functions, or responsibilities of the local

government, provided the use or transfer of assets, liabilities,

functions, or responsibilities for this purpose does not endanger the

health, safety, or welfare of residents of the local government or unconstitutionally impair a bond, note, security, or uncontested legal obligation of the local government.>>

(s) Apply for a loan from the state on behalf of the local

government, subject to the conditions of the emergency municipal

loan act, 1980 PA 243, MCL 141.931 to 141.942, in a sufficient

amount to pay the expenses of the emergency manager and for other

lawful purposes.

(t) Order, as necessary, 1 or more millage elections for the

local government consistent with the Michigan election law, 1954 PA

House Bill No. 4214 as amended March 9, 2011

116, MCL 168.1 to 168.992, sections 6 and 25 through 34 of article

IX of the state constitution of 1963, and any other applicable

state law. A millage election ordered for a local government

pursuant to this subdivision shall only be held at the general

November election.

(u) Authorize the borrowing of money by the local government

as provided by law.

(v) Approve or disapprove of the issuance of obligations of

the local government on behalf of the local government under this

subdivision. An election to approve or disapprove of the issuance

of obligations of the local government pursuant to this subdivision

shall only be held at the general November election.

(w) Enter into agreements with creditors <<or other persons or

entities>> for the payment of

existing debts, including the settlement of claims by the

creditors.

(x) Enter into agreements with creditors <<or other persons or

entities>> to restructure debt

on terms, at rates of interest, and with security as shall be

agreed among the parties, subject to approval by the state

treasurer.

<<(y) Enter into agreements with other local governments,

public bodies, or entities for the provision of services, the joint

exercise of powers, or the transfer of functions and responsibilities.>>

(z) For municipal governments, enter into agreements with

other units of <<municipal>> government to transfer property of the

municipal

government under 1984 PA 425, MCL 124.21 to 124.30, or as otherwise

provided by law, subject to approval by the state treasurer.

(aa) Enter into agreements with 1 or more other local

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governments <<or public bodies>> for the consolidation of services.

(bb) For a city, village, or township, the emergency manager

may recommend to the state boundary commission that the municipal

government consolidate with 1 or more other municipal governments,

if the emergency manager determines that consolidation would

materially alleviate the financial emergency of the municipal

government and would not materially and adversely affect the

financial situation of the government or governments with which the

municipal government in receivership is consolidated. Consolidation

under this subdivision shall proceed as provided by law.

(cc) For municipal governments, with approval of the governor,

disincorporate or dissolve the municipal government and assign its

assets, debts, and liabilities as provided by law.

(dd) Exercise solely, for and on behalf of the local

government, all other authority and responsibilities of the chief

administrative officer and governing body concerning the adoption,

amendment, and enforcement of ordinances or resolutions of the

local government as provided in the following acts:

(i) The home rule city act, 1909 PA 279, MCL 117.1 to 117.38.

(ii) The fourth class city act, 1895 PA 215, MCL 81.1 to

113.20.

(iii) The charter township act, 1947 PA 359, MCL 42.1 to 42.34.

(iv) 1851 PA 156, MCL 46.1 to 46.32.

(v) 1966 PA 293, MCL 45.501 to 45.521.

(vi) The general law village act, 1895 PA 3, MCL 61.1 to 74.25.

(vii) The home rule village act, 1909 PA 278, MCL 78.1 to

78.28.

House Bill No. 4214 as amended March 9, 2011

(viii) The revised school code, 1976 PA 451, MCL 380.1 to

380.1852.

<<(ix) 1979 PA 94, MCL 388.1601 to 388.1772.

(ee) Take any other action or exercise any power or authority

of any officer, employee, department, board, commission, or other

similar entity of the local government, whether elected or

appointed, relating to the operation of the local government. The

power of the emergency manager shall be superior to and supersede

the power of any of the foregoing <<officers or>> entities.

(ff) Remove, replace, appoint, or confirm the appointments to

any <<office,>> board, commission, authority, or other entity which is

<<within or is>> a

component unit of the local government.

(2) Except as otherwise provided in this act, during the

pendency of the receivership, the authority of the chief

administrative officer and governing body to exercise power for and

on behalf of the local government under law<<, charter, and ordinance>>

shall be

suspended <<and vested in the emergency manager>>.

(3) Except as otherwise provided in this subsection, any

contract involving a cumulative value of $50,000.00 or more is

subject to competitive bidding by an emergency manager. However, if

a potential contract involves a cumulative value of $50,000.00 or

more, the emergency manager may submit the potential contract to

the state treasurer for review and the state treasurer may

authorize that the potential contract is not subject to competitive

bidding.

(4) An emergency manager appointed for a city or village shall

not sell or transfer a public utility furnishing light, heat, or

power without the approval of a majority of the electors of the

city or village voting thereon, or a greater number if the city or

village charter provides, as required by section 25 of article VII

of the state constitution of 1963. In addition, an emergency

manager appointed for a city or village shall not utilize the

assets of a public utility furnishing heat, light, or power, the

finances of which are separately maintained and accounted for by

the city or village, to satisfy the general obligations of the city

or village.

Sec. 19a. Immediately upon the local government being placed

in receivership under section 15 and during the pendency of the

receivership, the salary, wages, or other compensation, including

the accrual of postemployment benefits, and other benefits of the

chief administrative officer and members of the governing body of

the local government shall be eliminated. This section does not

authorize the impairment of vested pension benefits. If an

emergency manager has reduced, suspended, or eliminated the salary,

wages, or other compensation of the chief administrative officer

and members of the governing body of a local government before the

effective date of this act, the reduction, suspension, or

elimination is valid to the same extent had it occurred after the

effective date of this act. The emergency manager may restore, in

whole or in part, any of the salary, wages, other compensation, or

benefits of the chief administrative officer and members of the

governing body during the pendency of the receivership, for such

time and on such terms as the emergency manager considers

House Bill No. 4214 as amended March 9, 2011

appropriate, to the extent that the manager finds that the

restoration of salary, wages, compensation, or benefits is

consistent with the financial and operating plan.

Sec. 20. In addition to the actions authorized in section 19,

an emergency manager for a school district may take 1 or more of

the following additional actions with respect to a school district

that is in receivership:

(a) Negotiate, renegotiate, approve, and enter into contracts

on behalf of the school district.

(b) Receive and disburse on behalf of the school district all

federal, state, and local funds earmarked for the school district.

These funds may include, but are not limited to, funds for specific

programs and the retirement of debt.

instruction for a reduced class schedule in accordance with

administrative rules governing the distribution of state school

aid.

(d) Sell<<, assign, transfer,>> or otherwise use the assets of the

school district to

meet past or current obligations <<or assure the fiscal accountability

of the school district>>, provided the use<<, assignment, or transfer>>

of assets for

this purpose does not impair the education of the pupils of the

school district. The power under this subdivision includes the

closing of schools or other school buildings in the school

district.

(e) Approve or disapprove of the issuance of obligations of

the school district.

House Bill No. 4214 as amended March 9, 2011

(f)>> Exercise solely, for and on behalf of the school district,

all other authority and responsibilities affecting the school

district that are prescribed by law to the school board and

superintendent of the school district.

<<(g)>> Employ or contract for, at the expense of the school

district, school administrators considered necessary to implement

this act.

Sec. 20a. Unless the potential sale and value of an asset is

included in the emergency manager's financial and operating plan

prepared under section 18, the emergency manager shall not sell an

asset of the local government valued at more than $50,000.00

without the state treasurer's approval.

<<Sec. 20b. A provision of an existing collective bargaining agreement that authorizes the payment of a benefit upon the death of a police officer or firefighter that occurs in the line of duty shall

not be impaired and is not subject to any provision of this act authorizing an emergency manager to reject, modify, or terminate 1 or more terms of an existing collective bargaining agreement.>>

Sec. 21. The emergency manager shall, on his or her own or

upon the advice of the local inspector if a local inspector has

been retained, make a determination as to whether possible criminal

conduct contributed to the financial situation resulting in the

local government's receivership status. If the emergency manager

determines that there is reason to believe that criminal conduct

has occurred, the manager shall refer the matter to the attorney

general and the local prosecuting attorney for investigation.

Sec. 22. (1) An emergency manager appointed under this act

shall file with the governor, the senate majority leader, the

speaker of the house of representatives, and the clerk of the local

government that is in receivership, and shall post on the internet

on the website of the local government, a report that contains all

of the following:

(a) A description of each expenditure made, approved, or

disapproved during the reporting period that has a cumulative value

of $5,000.00 or more and the source of the funds.

(b) A list of each contract that the emergency manager awarded

or approved with a cumulative value of $5,000.00 or more, the

purpose of the contract, and the identity of the contractor.

disapproved during the reporting period that has a cumulative value

of $5,000.00 or more and the proposed use of the funds.

(d) A description of any new position created or any vacancy

in a position filled by the appointing authority.

(e) A description of any position that has been eliminated or

from which an employee has been laid off.

(f) A copy of the contract with the emergency manager as

provided in section 15(5)(e).

(g) The salary and benefits of the emergency manager.

(h) The financial and operating plan as required under section

18.

(2) The report required under this section shall be submitted

every 3 months, beginning 6 months after the emergency manager's

appointment.

Sec. 23. (1) If, in the judgment of the emergency manager, no

reasonable alternative to rectifying the financial emergency of the

local government which is in receivership exists, then the

emergency manager may recommend to the governor and the state

treasurer that the local government be authorized to proceed under

title 11 of the United States Code, 11 USC 101 to 1532. If the

governor approves of the recommendation, the governor shall inform

the state treasurer and the emergency manager in writing of the

decision, with a copy to the superintendent of public instruction

if the local government is a school district. Upon receipt of the

written approval, the emergency manager is authorized to proceed

under title 11 of the United States Code, 11 USC 101 to 1532. This

section empowers the local government for which an emergency

manager has been appointed to become a debtor under title 11 of the

United States Code, 11 USC 101 to 1532, as required by section 109

of title 11 of the United States Code, 11 USC 109, and empowers the

emergency manager to act exclusively on the local government's

behalf in any such case under title 11 of the United States Code,

11 USC 101 to 1532.

(2) The recommendation to the governor and the state treasurer

under subsection (1) shall include 1 of the following:

(a) A determination by the emergency manager that no feasible

financial plan can be adopted that can satisfactorily rectify the

financial emergency of the local government in a timely manner.

(b) A determination by the emergency manager that a plan, in

effect for at least 180 days, cannot be implemented as written or

as it might be amended in a manner that can satisfactorily rectify

the financial emergency in a timely manner.

(3) The emergency manager shall provide a copy of the

recommendation as provided under subsection (1) to the

superintendent of public instruction if the local government is a

school district.

Sec. 24. A local government that is in receivership is

considered to be in a condition of financial emergency until the

emergency manager declares the financial emergency to be rectified

in his or her quarterly report to the state treasurer required

under section 15, and is subject to the written concurrence of the

state treasurer, and the concurrence of the superintendent of

public instruction if the local government is a school district.

The declaration shall not be made until the financial conditions

have been addressed and rectified.

Sec. 25. (1) An emergency manager is immune from liability as

provided in section 7(5) of 1964 PA 170, MCL 691.1407. A person

employed by an emergency manager is immune from liability as

provided in section 7(2) of 1964 PA 170, MCL 691.1407.

(2) The attorney general shall defend any civil claim, demand,

or lawsuit which challenges any of the following:

(a) The validity of this act.

(b) The authority of a state official or officer acting under

this act.

manager is or was acting within the scope of authority for an

emergency manager under this act.

(3) With respect to any aspect of a receivership under this

act, the costs incurred by the attorney general in carrying out the

responsibilities of subsection (2) for attorneys, experts, court

filing fees, and other reasonable and necessary expenses shall be

at the expense of the local government that is subject to that

receivership and shall be reimbursed to the attorney general by the

local government. The failure of a municipal government that is or

was in receivership to remit to the attorney general the costs

incurred by the attorney general within 30 days after written

notice to the municipal government from the attorney general of the

costs is a debt owed to this state and shall be recovered by the

state treasurer as provided in section 17a(5) of the Glenn Steil

state revenue sharing act of 1971, 1971 PA 140, MCL 141.917a. The

failure of a school district that is or was in receivership to

remit to the attorney general the costs incurred by the attorney

general within 30 days after written notice to the school district

from the attorney general of the costs is a debt owed to this state

and shall be recovered by the state treasurer as provided in the

state school aid act of 1979, 1979 PA 94, MCL 388.1601 to 388.1772.

(4) An emergency manager may procure and maintain, at the

expense of the local government for which the emergency manager is

appointed, worker's compensation, general liability, professional

liability, and motor vehicle insurance for the emergency manager

and any employee, agent, appointee, or contractor of the emergency

manager as may be provided to elected officials, appointed

officials, or employees of the local government. The insurance

procured and maintained by an emergency manager may extend to any

claim, demand, or lawsuit asserted or costs recovered against the

emergency manager and any employee, agent, appointee, or contractor

of the emergency manager from the date of appointment of the

emergency manager to the expiration of the applicable statute of

limitation if the claim, demand, or lawsuit asserted or costs

recovered against the emergency manager or any employee, agent,

appointee, or contractor of the emergency manager resulted from

conduct of the emergency manager or any employee, agent, appointee,

or contractor of the emergency manager taken in accordance with this

act during the emergency manager's term of service.

(5) If, after the date that the service of an emergency

manager is concluded, the emergency manager or any employee, agent,

appointee, or contractor of the emergency manager is subject to a

claim, demand, or lawsuit arising from an action taken during the

service of that emergency manager, and not covered by a procured

worker's compensation, general liability, professional liability,

or motor vehicle insurance, litigation expenses of the emergency

manager or any employee, agent, appointee, or contractor of the

emergency manager, including attorney fees for civil and criminal

proceedings and preparation for reasonably anticipated proceedings,

and payments made in settlement of civil proceedings both filed and

anticipated, shall be paid out of the funds of the local government

that is or was subject to the receivership administered by that

emergency manager, provided that the litigation expenses are

approved by the state treasurer and that the state treasurer

determines that the conduct resulting in actual or threatened legal

proceedings that is the basis for the payment is based upon both of

the following:

(a) The scope of authority of the person or entity seeking the

payment.

(b) The conduct occurred on behalf of a local government while

it was in receivership under this act.

(6) The failure of a municipal government to honor and remit

the legal expenses of a former emergency manager or any employee,

agent, appointee, or contractor of the emergency manager as

required by this section is a debt owed to this state and shall be

recovered by the state treasurer as provided in section 17a(5) of

the Glenn Steil state revenue sharing act of 1971, 1971 PA 140, MCL

141.917a. The failure of a school district to honor and remit the

legal expenses of a former emergency manager or any employee,

agent, appointee, or contractor of the emergency manager as

required by this section is a debt owed to this state and shall be

recovered by the state treasurer as provide in the state school aid

act of 1979, 1979 PA 94, MCL 388.1601 to 388.1772.

Sec. 26. (1) The local elected and appointed officials and

employees, agents, and contractors of a local government shall

promptly and fully provide the assistance and information necessary

and properly requested by the state financial authority, a review

team, or the emergency manager in the effectuation of their duties

and powers and of the purposes of this act. If the review team or

emergency manager believes that a local elected or appointed

official or employee, agent, or contractor of the local government

is not answering questions accurately or completely or is not

furnishing information requested, the review team or emergency

manager may issue subpoenas and administer oaths to the local

elected or appointed official or employee, agent, or contractor to

furnish answers to questions or to furnish documents or records, or

both. If the local elected or appointed official or employee,

agent, or contractor refuses, the review team or emergency manager

may bring an action in the circuit court in which the local

government is located or Ingham county circuit court, as determined

by the emergency manager, to compel testimony and furnish records

House Bill No. 4214 as amended, March 9, 2011

and documents. An action in mandamus may be used to enforce this

section.

(2) Failure of a local government official to abide by this

act shall be considered gross neglect of duty, which the review

team or emergency manager may report to the state financial

authority and the attorney general. Following review and a hearing

with a local government elected official, the state financial

authority may recommend to the governor that the governor remove

the elected official from office. If the governor removes the

elected official from office, the resulting vacancy in office shall

be filled as prescribed by law.

(3) Subject to section 30(2), a local government placed in

receivership under this act is not subject to section 15(1) of 1947

PA 336, MCL 423.215, for a period of 5 years from the date the

local government is placed in receivership or until the time the

receivership is terminated, whichever occurs first.

Sec. 27. (1) Before the termination of receivership and the

completion of the emergency manager's term, the manager shall adopt

and implement a 2-year budget<<, including all contractual and

employment agreements,>> for the local government commencing

with the termination of receivership. <<

(2) After the completion of the emergency manager's term and

the termination of receivership, the governing body of the local

government shall not amend <<

>> the 2-year budget adopted under

House Bill No. 4214 as amended March 9, 2011

subsection (1) without the approval of the state treasurer, and

shall not revise any <<order or>> ordinance implemented by the

emergency manager

during his or her term prior to 1 year after the termination of

receivership.

Sec. 28. This act is not construed to give the emergency

manager or the state financial authority the power to impose taxes,

over and above those already authorized by law, without the

approval at an election of a majority of the qualified electors

voting on the question.

Sec. 29. The state financial authority is authorized and

directed to issue bulletins or adopt rules as necessary to carry

out the purposes of this act. A rule adopted under this section

shall be adopted in accordance with the administrative procedures

act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

Sec. 30. (1) An emergency financial manager appointed and

serving under state law prior to the effective date of this act

shall continue under this act as an emergency manager for the local

government and shall fulfill his or her duties and responsibilities

and exercise all of the powers granted under former 1988 PA 101 or

former 1990 PA 72. Except as provided in subsection (2), the

provisions of this act shall apply to any local government for

which an emergency financial manager is appointed and serving as of

the effective date of this act.

(2) For a local government for which an emergency financial

manager is serving as of the effective date of this act, the

provisions of section 26(3) shall not become applicable until 60

days after the effective date of this act.

Sec. 31. If any portion of this act or the application of this

act to any person or circumstances is found to be invalid by a

court, the invalidity shall not affect the remaining portions or

applications of the act which can be given effect without the

invalid portion or application. The provisions of this act are

severable.

Enacting section 1. The local government fiscal responsibility

act, 1990 PA 72, MCL 141.1201 to 141.1291, is repealed.

Enacting section 2. This act does not take effect unless

Senate Bill No. 158 of the 96th Legislature is enacted into law.