SENATE BILL NO. 779 October 30, 1997, Introduced by Senators V. SMITH, O'BRIEN, VAUGHN and PETERS and referred to the Committee on Finance. A bill to amend 1943 PA 202, entitled "Municipal finance act," by amending sections 20, 21, 22, 23, and 24 of chapter IV (MCL 134.20, 134.21, 134.22, 134.23, and 134.24), as added by 1988 PA 206. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 CHAPTER IV 2 Sec. 20. (1) A municipality that is a home rule city under 3Act No. 279 of the Public Acts of 1909, being sections 117.1 to4117.38 of the Michigan Compiled Laws1909 PA 279, MCL 117.1 TO 5 117.38, that collects ad valorem taxes on behalf of a first class 6 school district described in this section, and that does not 7 return delinquent ad valorem taxes to the county treasurer in the 8 county in which the home rule city is situated may, without a 9 vote of the electors in the home rule city,and upon a request04497'97 FDD 2 1by a resolution adopted by the board of education of the first2class school district,borrow money and issue delinquentad3valoremtax notes OR BONDS IN 1 OR MORE SERIES in anticipation 4 of the collection of the delinquentad valoremtaxes, as pro- 5 vided in this section and sections 21 to 24., which taxes are6unpaid pursuant to the previous levy of ad valorem taxes by the7school district.The notes may be issued to payto a8 DELINQUENT TAXES OR LEVIES THAT WILL BECOME DELINQUENT TAXES 9 PRIOR TO THE FINAL MATURITY OF THE NOTES OR BONDS TO THE CITY OR, 10 UPON REQUEST BY A RESOLUTION ADOPTED BY THE BOARD OF EDUCATION OF 11 THE FIRST CLASS SCHOOL DISTRICT, TO THE first class school dis- 12 trict,whose boundaries are coterminous with the boundaries of 13 the home rule city., the school district's share of delinquent14ad valorem taxes that have been delinquent for not more than 315years before the date of issuance of the notes.All OR A PORTION 16 OF THE delinquent taxes owed to the HOME RULE CITY OR TO THE 17 school district, OR BOTH, at the timeoftheissuance of the18 notes OR BONDS ARE ISSUED orat theFOR THE PERIOD OF time pro- 19 vided in the resolution authorizing issuance of the notes OR 20 BONDS may be pledged to the payment of the principal of and 21 interest on the notes OR BONDS. 22 (2) A HOME RULE CITY MAY ISSUE REFUNDING TAX NOTES OR BONDS 23 IN 1 OR MORE SERIES TO REFUND TAX NOTES OR BONDS ISSUED UNDER 24 THIS SECTION AND SECTION 22 IF THE HOME RULE CITY DETERMINES THAT 25 REFUNDING TAX NOTES OR BONDS IS EXPEDIENT, WHETHER OR NOT THE TAX 26 NOTES OR BONDS TO BE REFUNDED HAVE MATURED. THE PROCEEDS OF THE 04497'97 3 1 REFUNDING TAX NOTES OR BONDS SHALL BE APPLIED TO THE PURCHASE, 2 REDEMPTION, OR PAYMENT OF THE TAX NOTES OR BONDS REFUNDED. 3 (3)(2)As used in this section and sections 21 to 24:,4"notes"5 (A) "DELINQUENT TAXES" MEANS DELINQUENT AD VALOREM TAXES 6 LEVIED ON REAL OR PERSONAL PROPERTY OR A DELINQUENT SPECIAL AD 7 VALOREM LEVY, SPECIAL ASSESSMENT, USER FEE OR CHARGE FOR UNPAID 8 RATES OR CHARGES FOR SERVICES, OR OTHER CHARGE IMPOSED BY OR ON 9 BEHALF OF A HOME RULE CITY OR SCHOOL DISTRICT OR COLLECTED BY A 10 HOME RULE CITY OR SCHOOL DISTRICT. 11 (B) "NOTES" means delinquentad valoremtax notes OR BONDS 12 authorized to be issued under this section and section 22. 13 Sec. 21. (1) The governing body of a home rule city 14 described in section 20 may create by resolution a delinquentad15valoremtax fund that may be designated as the "city of 16 _______________ delinquent tax fund". Upon the establishment of 17 the delinquent tax fund, all delinquentad valoremtaxes 18 pledged in a resolution authorizing issuance of notes OR BONDS, 19 including taxes LEVIED on personal property, due and payable to 20 the HOME RULE CITY OR TO THE school district, OR BOTH, are due 21 and payable to the HOME RULE city for deposit to the delinquent 22 tax fund UPON RECEIPT. The delinquent tax fundshallMAY be 23 segregated into separate funds or accounts for the delinquentad24valoremtaxesof each yearpledged in the resolution authoriz- 25 ing issuance of the notes OR BONDS. 26 (2) If a delinquent tax fund is established under subsection 27 (1), the chief financial officer of the HOME RULE cityshall be04497'97 4 1 IS the agent for the HOME RULE city with respect to the 2 delinquent tax fund and, upon approval of the governing body of 3 the HOME RULE city, may enter into contracts with other munici- 4 palities or private individuals, firms, or corporations in con- 5 nection with any transaction relating to the delinquent tax fund 6 or any borrowing made by the HOME RULE city under section 22 of 7 this chapter, including contracting for all services necessary to 8 complete the borrowing OR TO COLLECT THE DELINQUENT TAXES. 9 (3) The chief financial officer of the HOME RULE city shall 10 pay from the delinquent tax fund an amount equal to the delin- 11 quentad valoremtaxes that are due and payable to the HOME 12 RULE CITY OR TO THE school district promptly after the net pro- 13 ceeds of the notes OR BONDS are deposited in the delinquent tax 14 fund. The amount in the fund that shall be paid and to which the 15 HOME RULE CITY OR THE school district is entitled is the autho- 16 rized portion of delinquentad valoremtaxes AND LEVIES THAT 17 MAY BECOME DELINQUENT TAXES in anticipation of which notes OR 18 BONDS are issued by the HOME RULE city. 19 (4) The HOME RULE city shall pay to the delinquent tax fund 20 the interest charges and penalties established by law, CHARTER, 21 OR AN ORDINANCE AUTHORIZED BY CHARTER and pledged by the resolu- 22 tion of the governing body authorizing issuance of the notes OR 23 BONDS. A HOME RULE CITY MAY ESTABLISH PROCEDURES FOR COLLECTING 24 DELINQUENT TAXES AND ENFORCING TAX LIENS FOR DELINQUENT TAXES AND 25 MAY IMPOSE INTEREST CHARGES AND PENALTIES AT RATES ESTABLISHED BY 26 CHARTER OR AN ORDINANCE AUTHORIZED BY CHARTER. The property tax 27 administration fee of the HOME RULE city authorized under the 04497'97 5 1 general property tax act,Act No. 206 of the Public Acts of21893, being sections 211.1 to 211.157 of the Michigan Compiled3Laws1893 PA 206, MCL 211.1 TO 211.157, shall not be pledged to 4 the notes OR BONDS, shall not be paid to the delinquent tax fund, 5 and shall be retained by the HOME RULE city for its services. IN 6 ADDITION TO ANY OTHER FEE OR CHARGE AUTHORIZED BY LAW, CHARTER, 7 OR AN ORDINANCE AUTHORIZED BY CHARTERS, A HOME RULE CITY MAY 8 CHARGE A SCHOOL DISTRICT A PRO RATA ALLOCATION OF ALL OF THE 9 COSTS OF ISSUANCE AND ADMINISTRATION OF THE NOTES OR BONDS ISSUED 10 UNDER THIS CHAPTER AND THAT CHARGE MAY BE RETAINED FROM THE PRO- 11 CEEDS OF THE NOTES OR BONDS OTHERWISE PAYABLE TO THAT SCHOOL 12 DISTRICT. 13 (5) A surplus in the fund after the payment of all principal 14 of and interest on the notes OR BONDS and all other costs related 15 to the borrowing shall be transferred by the chief financial 16 officer of the HOME RULE city from the delinquent tax fund to the 17 HOME RULE CITY OR TO THE school districtentitled to the18surplusON A PRO RATA BASIS AS PROVIDED under the provisions of 19 the resolution authorizing issuance of the notes OR BONDS. 20 (6) A home rule city described in section 20 may borrow 21 money to create a delinquent tax fund as provided in this 22 section. 23 Sec. 22. (1) By resolution of its governing body and with- 24 out a vote of its electors, a home rule city that creates a 25 delinquent tax fund under section 21 may borrow money and issue 26 1 OR MORE SERIES OF delinquentad valoremtax notes OR BONDS to 27 establish or continue, in whole or in part, the delinquent tax 04497'97 6 1 fund and to pay the expenses of the borrowing.TheALL OR A 2 PORTION OF THE notes OR BONDS may be a full faith and credit gen- 3 eral obligation of the HOME RULE city within constitutional, 4 statutory, and charter limitations applicable to the HOME RULE 5 cityifAS authorized by resolution of the governing body of 6 the HOME RULE city authorizing issuance of the notes OR BONDS. 7 NOTES OR BONDS ISSUED PURSUANT TO THIS SECTION OR SECTION 20 ARE 8 NOT A DEBT OF THE HOME RULE CITY WITHIN THE MEANING OF ANY CON- 9 STITUTIONAL, STATUTORY, OR CHARTER LIMITATION. 10 (2) In the resolution authorizing the borrowing and issuance 11 of notes, the delinquent ad valorem taxes from which the notes12are to be repaid shall be pledged to the payment of the principal13of and interest on the notes, andOR BONDS, the proceeds of the 14 collection of the delinquentad valoremtaxes pledged TO THE 15 PAYMENT OF PRINCIPAL OF AND INTEREST ON THE NOTES OR BONDS and 16 the interest AND PENALTIES on the delinquentad valoremtaxes 17 shall be placed ina1 OR MORE segregated debt servicefund or18accountFUNDS OR ACCOUNTS AS PROVIDED BY THE AUTHORIZING 19 RESOLUTION. The taxes placed in the segregated debt service 20fund or accountFUNDS OR ACCOUNTS shall not be used for any 21 other purpose until THERE IS IN THE FUNDS OR ACCOUNTS AN AMOUNT 22 SUFFICIENT TO PAY the ANNUAL principal of and interest on the 23 notesare paid in fullOR BONDS AND ANY MANDATORY REDEMPTION 24 REQUIREMENTS OR OTHER PAYMENTS REQUIRED UNDER THE AUTHORIZING 25 RESOLUTION, AT WHICH TIME AND TO THE EXTENT PERMITTED BY THE 26 AUTHORIZING RESOLUTION, ANY EXCESS AMOUNTS MAY BE CONSIDERED 27 SURPLUS AND TRANSFERRED PURSUANT TO SECTION 21(5). The 04497'97 7 1 segregated debt servicefund or accountFUNDS OR ACCOUNTS shall 2 be established as a part of the delinquent tax fund and shall be 3 accounted for separately on the books of the HOME RULE city that 4 issues the notes OR BONDS. 5 (3) The proceeds of notes OR BONDS shall be placed in the 6 delinquent tax fund and used as provided in section 21, after the 7 expenses of borrowing have been deducted from the proceeds of the 8 notes OR BONDS. 9 (4) Before a HOME RULE city issues notes OR BONDS, the chief 10 financial officer shall make a sworn application to the depart- 11 ment for permission to issue the notes OR BONDS and shall attach 12 to the application a certified copy of the resolution authorizing 13 the issuance of the notes OR BONDS or, if available to the HOME 14 RULE city, obtain an exception from prior approval of the 15 department. The application shall specify the actual amount of 16 the notes OR BONDS or the maximum amount that the notes OR BONDS 17 shall not exceed, the maturity or maturities of the notes OR 18 BONDS, and the maximum interest rate on the notes OR BONDS. 19 After receiving these materials, the department shall issue its 20 order approving or disapproving the issuance of the notes OR 21 BONDS. An order of the department permitting the issuance of 22 notes OR BONDS or an exception from prior approval under this act 23 is not an approval of the legality of the notes OR BONDS. 24 However, after the issuance of the notes OR BONDS, a determina- 25 tion or finding made by the department involving a question of 26 factshall beIS considered conclusive of that fact. The 27issuance of the order of the departmentDEPARTMENT'S ORDER 04497'97 8 1 granting permission to issue notes OR BONDS establishes the 2 presumption that the department has made the determinations of 3 facts or circumstances, has given the approvals, and has reached 4 the opinions necessary beforeissuance ofISSUING the order. 5 (5) Notes OR BONDS issued by the HOME RULE city shall meet 6 all of the following requirements: 7 (a) Be in an aggregate principal amount not exceeding the 8 aggregate amount of the delinquentad valoremtaxes in antici- 9 pation of which the notes OR BONDS are issued plus expenses 10 incurred in connection with the issuance of the notes OR BONDS, 11 exclusive of interest. 12 (b) Bear interest at a rate not exceeding 18% per annum or 13 at another rate as provided in section 1a of chapter III. 14 (c) Be in a denomination and mature on a date not exceeding 1548 years after the date of issue as determined by the govern- 16 ing body in the resolution authorizing THE issuance of the notes 17 OR BONDS. 18 (d) Be secured IN WHOLE OR IN PART as provided in this sec- 19 tion and the resolution of the governing body and as permitted in 20 section 12 of chapter III. 21 (6) The resolution authorizing THE issuance of the notes OR 22 BONDS may provide that all or a part of the notes OR BONDS are 23 subject to redemption and shall set forth the terms and condi- 24 tions of the redemption, if any. 25 (7) Notwithstanding section 2(1) of chapter III, the sale 26 and award of notes OR BONDS may be conducted and made by the 27 chief financial officer of the HOME RULE city issuingthemTHE 04497'97 9 1 NOTES OR BONDS at a public or private sale as provided in the 2 resolution of the governing body authorizing THE issuance of the 3 notes OR BONDS. 4 (8) If AND TO THE EXTENT the notes OR BONDS are designated 5 full faith and credit general obligation notes OR BONDS of the 6 HOME RULE city ISSUING THE NOTES OR BONDS, the notes OR BONDS are 7 a general obligation of the HOME RULE cityissuingAND the 8 notesandOR BONDS shall pledge to the payment of principal of 9 and interest on the notes OR BONDS issued the full faith and 10 credit of the HOME RULE city, obligating the HOME RULE city to 11 levy taxes to the extent necessary to pay the principal of and 12 interest on the notes OR BONDS, subject to applicable constitu- 13 tional, statutory, and charter limitations. 14 (9) Interest on the notes OR BONDS may be made payable in 15 the manner provided in the resolution of the governing body of 16 the HOME RULE city authorizing the issuance of the notes OR 17 BONDS. 18 (10) The principal of and interest on the notes OR BONDS 19 shall be payable in lawful money of the United States. The notes 20 OR BONDS and the interest on the notes OR BONDS are exempt from 21 all taxation by this state or a political subdivision or taxing 22 authorityinOF this state. 23 (11) The notes OR BONDS may be made payable at a bank or 24 trust company or as otherwise provided in the resolution of the 25 governing body of the HOME RULE city authorizing the issuance of 26 the notes OR BONDS. 04497'97 10 1 Sec. 23. (1) If the proceeds of the collection of 2 delinquentad valoremtaxes pledged in the resolution to THE 3 payment ofthe amount ofthe principal of and interest on the 4 notes OR BONDS, together with penalties and interest on the 5 delinquentad valoremtaxes, are not sufficient to paythat6amountTHE PRINCIPAL OF AND INTEREST ON THE NOTES OR BONDS when 7 due, upon demand of the HOME RULE city, the school district shall 8 pay to the HOME RULE city for deposit to the delinquent tax fund 9 from EITHER the SCHOOL DISTRICT'S general fundof school10districtor FROM any additional tax that may be levied within 11 the school district's constitutional and statutory limits, an 12 amount to pay the SCHOOL DISTRICT'S PRO RATA SHARE OF THE insuf- 13 ficiency in order that THE principal of and interest on the notes 14 OR BONDS, together with penalties and interest on the delinquent 15ad valoremtaxes,shall beARE paid in full when due. A HOME 16 RULE CITY MAY PAY THE HOME RULE CITY'S PRO RATA SHARE OF THE 17 INSUFFICIENCY FROM THE HOME RULE CITY'S GENERAL FUND OR FROM ANY 18 ADDITIONAL TAX THAT MAY BE LEVIED WITHIN THE HOME RULE CITY'S 19 CONSTITUTIONAL, STATUTORY, AND CHARTER LIMITS. After payment of 20 the insufficiency, the school districtmayOR THE HOME RULE 21 CITY, AS APPLICABLE, SHALL be reimbursed the amount paid from the 22 delinquent tax fund by the HOME RULE city from delinquentad23valoremtaxes pledged to the notes OR BONDS and collected and 24 deposited in the delinquent tax fund if those amounts are not 25 needed to pay principal of and interest on the notes OR BONDS 26 coming due. AS USED IN THIS CHAPTER, "PRO RATA SHARE" MEANS THE 27 PROPORTION OF THE PROCEEDS OF THE ORIGINAL ISSUE OF NOTES OR 04497'97 11 1 BONDS, LESS COSTS OF ISSUANCE, THAT THE HOME RULE CITY OR THE 2 SCHOOL DISTRICT, AS APPLICABLE, HAS RECEIVED. 3 (2) If, for any reason, the HOME RULE city issuing the notes 4 OR BONDS pays any part of the SCHOOL DISTRICT'S PRO RATA SHARE OF 5 THE principal of or interest on the notes OR BONDS pursuant to 6 the resolution of the governing body of the HOME RULE city autho- 7 rizing the issuance of the notes OR BONDS on account of the 8 pledge of the full faith and credit of the HOME RULE city, the 9 school district shall PROMPTLY reimburse the HOME RULE city 10promptlythe amount paid.SuchTHE obligation to reimburse 11 the HOME RULE cityshall beIS a full faith and credit general 12 obligation of the school district. If the school district does 13 not promptly reimburse the HOME RULE city the amount paid, the 14 HOME RULE city may retain as reimbursement for that amount the 15 following: 16 (a) Delinquentad valoremtaxes pledged to payment of 17 principal of and interest on the notes OR BONDS if the amounts 18 are not needed to pay principal of and interest on the notes OR 19 BONDS coming due. 20 (b) Any other funds payable from the HOME RULE city to the 21 school district not otherwise pledged. 22 Sec. 24.NotesOBLIGATIONS issued under sections 20 to 23 23 may be issued at an original issue discount not to exceed2% of24the face value of the note issuedTHE DISCOUNT AUTHORIZED UNDER 25 SECTION 2 OF CHAPTER III. 04497'97 Final page. FDD