HOUSE BILL No. 5650

 

June 11, 2014, Introduced by Rep. Shirkey and referred to the Committee on Financial Liability Reform.

 

     A bill to amend 2001 PA 34, entitled

 

"Revised municipal finance act,"

 

by amending section 701 (MCL 141.2701), as amended by 2002 PA 500.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 701. (1) Subject to subsection (3), if a municipality has

 

municipal securities outstanding, or with the approval of its

 

electors has authorized the issuance of municipal securities to be

 

paid from collections of its next tax levy, an officer or official

 

body charged with a duty in connection with the determination of

 

the amount of the next taxes to be raised or with the levying of

 

the next taxes, shall include all of the following in the amount of

 

taxes levied each year:

 

     (a) An amount such that the estimated collections will be

 

sufficient to promptly pay, when due, the interest on all municipal

 

securities and the portion of the principal falling due whether by

 


maturity or by mandatory redemption before the time of the

 

following year's tax collection.

 

     (b) An amount, if there are outstanding mandatory redemption

 

refunding securities, sufficient to provide the sum required to be

 

deposited, by the ordinance or resolution authorizing the issue,

 

into the sinking fund for that purpose before the time of the

 

following year's tax collection.

 

     (c) An amount, if there are outstanding mandatory redemption

 

municipal securities other than refunding securities not required

 

to be redeemed in annual amounts before the maturity of the

 

outstanding mandatory redemption municipal securities, that if

 

deposited annually into a sinking fund will, with the existing

 

sinking fund pertaining to the municipal securities and the

 

increment of the municipal securities, be sufficient to pay the

 

municipal securities at maturity.

 

     (d) An amount necessary to pay debt service charges or

 

obligations on municipal securities or agreements described in

 

section 317(5) falling due in the immediately preceding fiscal

 

year, to the extent that the tax levy in the preceding fiscal year

 

was inadequate to pay, when due, the debt service charges or

 

obligations on municipal securities or agreements described in

 

section 317(5). The municipality shall do 1 or more of the

 

following with the proceeds of the tax levy:

 

     (i) Deposit in the debt retirement fund established for the

 

municipal securities and used to pay debt service charges or

 

obligations on municipal securities or agreements described in

 

section 317(5).

 


     (ii) Use to pay debt service on short-term municipal securities

 

issued under section 403(5).

 

     (iii) Use to reimburse the municipality for any advances of

 

funds used for the purposes described in subparagraph (i) or (ii).

 

     (2) Subsection (1) does not limit the amount required to be

 

levied in a year for the purposes prescribed in that subsection, by

 

the terms of an ordinance or resolution authorizing the issuance of

 

the municipal securities.

 

     (3) If the municipal securities were authorized or issued

 

before December 23, 1978, or were approved by the electors of a

 

municipality, the municipality shall levy the full amount of taxes

 

required by this section for the payment of the municipal

 

securities without limitation as to rate or amount and in addition

 

to other taxes that the municipality may be authorized to levy, and

 

an unlimited tax pledge by that municipality described in the

 

unlimited tax election act, 1979 PA 189, MCL 141.161 to 141.168,

 

shall constitute, without the requirement of further action or

 

agreement, a statutory first lien on all taxes subject to the

 

unlimited tax pledge. This subsection applies to an unlimited tax

 

pledge made prior to or after the date of enactment of the

 

amendatory act that added this sentence. If the municipal

 

securities were authorized or issued by a municipality after

 

December 22, 1978, and were not approved by the electors of the

 

municipality, the municipality shall set aside each year from the

 

levy and collection of ad valorem taxes as required by this section

 

as a first budget obligation for the payment of the municipal

 

securities. However, the ad valorem taxes shall be subject to

 


applicable charter, statutory, or constitutional rate limitations.

 

     (4) If there is surplus money on hand for the payment of

 

principal or interest at the time of making an annual tax levy, and

 

provision has not been made in the authorizing resolution for the

 

disposition of that money, the annual levy for principal or

 

interest shall be adjusted to reflect available funds.

 

     (5) Money remaining in a debt retirement fund from the levy of

 

a tax or an account within a debt retirement fund from the levy of

 

a tax after the retirement of all municipal securities payable from

 

that fund shall be used in the following order of priority:

 

     (a) To pay other outstanding unlimited tax full faith and

 

credit municipal securities.

 

     (b) To pay other outstanding limited tax full faith and credit

 

municipal securities.

 

     (c) To be deposited in the general fund of the municipality.

 

     (6) As taxes are collected, there shall be set aside that

 

portion of the collections that is allocable to the payment of the

 

principal and interest on the municipal securities. The portion set

 

aside shall be held in trust for the owners of the municipal

 

securities and divided pro rata among the various sinking funds and

 

debt retirement funds in accordance with the amount levied for that

 

purpose. Tax collections paid into a debt retirement fund, if the

 

fund is for the payment of more than 1 issue of municipal

 

securities, shall be allocated on the books and records of the

 

municipality between the various issues in accordance with the

 

amounts levied for that purpose.

 

     (7) An officer who willfully fails to perform duties required

 


by this section is personally liable to the municipality or to a

 

holder of a municipal security for loss or damage arising from his

 

or her failure.

 

     (8) As used in this section, "tax levy" includes special

 

assessments.