HOUSE BILL No. 5279

 

February 6, 2014, Introduced by Reps. Glardon, Kelly, Victory, McCready, Schmidt, Graves and Schor and referred to the Committee on Financial Liability Reform.

 

     A bill to amend 2001 PA 34, entitled

 

"Revised municipal finance act,"

 

by amending section 518 (MCL 141.2518), as added by 2012 PA 329.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 518. (1) Through December 31, 2014, in connection with

 

the partial or complete cessation of accruals to a defined benefit

 

plan or the closure of the defined benefit plan to new or existing

 

employees, and the implementation of a defined contribution plan,

 

or to fund costs of a county, city, village, or township that has

 

already ceased accruals to a defined benefit plan, a county, city,

 

village, or township may by ordinance or resolution of its

 

governing body, and without a vote of its electors, issue a

 

municipal security under this section to pay all or part of the

 

costs of the unfunded pension liability for that retirement program

 


provided that the amount of taxes necessary to pay the principal

 

and interest on that municipal security, together with the taxes

 

levied for the same year, shall not exceed the limit authorized by

 

law.

 

     (2) Through December 31, 2014, a county, city, village, or

 

township may by ordinance or resolution of its governing body, and

 

without a vote of its electors, issue a municipal security under

 

this section to pay the costs of the unfunded accrued health care

 

liability provided that the amount of taxes necessary to pay the

 

principal and interest on that municipal security, together with

 

the taxes levied for the same year, shall not exceed the limit

 

authorized by law or to refund in whole or in part a contract

 

obligation issued for the same purpose. Postemployment health care

 

or benefits may be funded by the county, city, village, or

 

township. The funding of postemployment health care benefits by a

 

county, city, village, or township as provided in this act shall

 

not constitute a contract to pay the postemployment health care

 

benefits.

 

     (3) Before a county, city, village, or township issues a

 

municipal security under this section, the county, city, village,

 

or township shall publish a notice of intent to issue the municipal

 

security. The notice of intent and the rights of referendum shall

 

meet the requirements of section 517(2).

 

     (4) Before a county, city, village, or township issues a

 

municipal security under this section, the county, city, village,

 

or township shall prepare and make available to the public a

 

comprehensive financial plan that includes all of the following:

 


     (a) An analysis of the current and future obligations of the

 

county, city, village, or township with respect to each retirement

 

program and each postemployment health care benefit program of the

 

county, city, village, or township.

 

     (b) Evidence that the issuance of the municipal security

 

together with other funds lawfully available will be sufficient to

 

eliminate the unfunded pension liability or the unfunded accrued

 

health care liability.

 

     (c) A debt service amortization schedule and a description of

 

actions required to satisfy the debt service amortization schedule.

 

     (d) A certification by the person preparing the plan that the

 

comprehensive financial plan is complete and accurate.

 

     (e) If the proceeds of the borrowing are to be deposited in a

 

health care trust fund, a plan in place from the county, city,

 

village, or township to mitigate the increase in health care costs

 

and may include a wellness program that promotes the maintenance or

 

improvement of healthy behaviors.

 

     (5) Municipal securities issued under this section by a

 

county, city, village, or township and the interest on and income

 

from the municipal securities are exempt from taxation by this

 

state or a political subdivision of this state.

 

     (6) The proceeds of a municipal security issued under this

 

section may be used to pay the costs of issuance of the municipal

 

security. Except for a refunding, the proceeds of a municipal

 

security issued under this section to cover unfunded health care

 

liability shall be deposited in a health care trust fund, a trust

 

created by the issuer which has as its beneficiary a health care

 


trust fund, or, for a county, city, village, or township, a

 

restricted fund within a trust that would only be used to retire

 

the municipal securities issued under subsection (1) or (3). A

 

county, city, village, or township shall have the power to create a

 

trust to carry out the purposes of this subsection. The trust

 

created under this subsection shall invest its funds in the same

 

manner as funds invested by a health care trust fund. The trust

 

created under this subsection shall comply with all of the

 

following:

 

     (a) Report its financial condition according to generally

 

accepted accounting principles.

 

     (b) Be tax-exempt under the internal revenue code.

 

     (7) A county, city, village, or township issuing municipal

 

securities under this section may enter into indentures or other

 

agreements with trustees and escrow agents for the issuance,

 

administration, or payment of the municipal securities.

 

     (8) Before a county, city, village, or township issues a

 

municipal security under this section, the county, city, village,

 

or township shall obtain the approval of the department.

 

     (9) If a county, city, village, or township has issued a

 

municipal security under this section, that county, city, village,

 

or township shall not change the benefit structure of the defined

 

benefit plan if the defined benefit plan is undergoing the partial

 

cessation of accruals. However, a county, city, village, or

 

township may reduce benefits of the defined benefit plan for years

 

of service that accrue after the issuance of municipal securities

 

under this section.

 


     (10) A county, city, village, or township shall not issue a

 

municipal security under subsection (1) or (2) unless the 1 of the

 

following applies:

 

     (a) The county, city, village, or township has been assigned a

 

credit rating within the category of AA or higher or the equivalent

 

by at least 1 nationally recognized rating agency.

 

     (b) The county, city, village, or township has been assigned a

 

credit rating of A or higher or the equivalent by at least 1

 

nationally recognized rating agency and that municipality security

 

is or will be insured at the time of issuance.

 

     (11) A county, city, village, or township that issues a

 

municipal security under subsection (1) shall covenant with the

 

holders of the municipal security and this state that it will not,

 

after the issuance of the municipal security and while the

 

municipal security is outstanding, rescind whatever action it has

 

taken to make a partial or complete cessation of accruals to a

 

defined benefit plan or the closure of the defined benefit plan for

 

new or existing employees.