September 17, 2014, Introduced by Senator PAPPAGEORGE and referred to the Committee on Appropriations.
A bill to amend 2005 PA 92, entitled
"School bond qualification, approval, and loan act,"
by amending sections 3, 4, 5, 6, 7, 8, 9, 11, 12, 14, and 16 (MCL
388.1923, 388.1924, 388.1925, 388.1926, 388.1927, 388.1928,
388.1929, 388.1931, 388.1932, 388.1934, and 388.1936), sections 3,
4, 5, 6, 7, 8, 9, 11, and 16 as amended by 2012 PA 437.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 3. As used in this act:
(a) "Computed millage" means the number of mills in any year,
not
less than 7 mills and not more than up to 13 mills, determined
on
the date of issuance of the an
order qualifying the bonds or on
a
later date if requested by the school district and approved by
the
state treasurer, otherwise as
described in this act that, if
levied by the school district, will generate sufficient annual
proceeds to pay principal and interest on all the school district's
qualified bonds plus principal and interest on all qualified loans
related to those qualified bonds no later than the final mandatory
repayment date. Based on changes of circumstances, including, but
not limited to, additional bond qualification, refundings, changes
in qualified loan interest rates, changes in taxable values, and
assumptions contained in any then currently effective rules,
bulletins, or guidelines issued by the state treasurer pursuant to
section 5(2)(c), the school district shall not less than annually,
beginning on October 1, 2013, using methods prescribed in this act,
recalculate the computed millage necessary to generate sufficient
annual levy proceeds to pay principal and interest on all of the
school district's qualified bonds and principal and interest on all
qualified loans related to those qualified bonds not later than the
final mandatory repayment date. If the school district determines
that the recalculated computed millage is lower than its current
millage levy rate, the school district shall promptly notify the
state treasurer in writing of the recalculated computed millage.
Immediately thereafter, the school district shall decrease its
millage levy rate to the recalculated computed millage, but not
below the computed millage established pursuant to the most recent
order qualifying bonds for that school district, or to the minimum
levy prescribed by law for receipt of qualified loans, whichever
rate is higher. If the school district determines that the
recalculated computed millage is higher than its current millage
levy rate, the school district shall promptly notify the state
treasurer in writing of the recalculated computed millage.
Immediately thereafter, the school district shall increase its
millage levy rate to the recalculated computed millage, subject to
1 of the following exceptions, and subject to any maximum millage
levy rate otherwise prescribed for by law:
(i) For each school district's first recalculated computed
millage required as of October 1, 2013, increase its millage levy
by a percentage amount equal to the equivalent percentage of
taxable value change for that school district over the immediately
preceding 5 years, but not higher than the recalculated computed
millage.
(ii) For each school district's subsequent recalculated
computed millage beginning October 1, 2014 and each year
thereafter, increase its millage levy by a percentage amount equal
to the percentage of taxable value decline for the immediately
preceding year ending September 30, but not to a rate higher than
the recalculated computed millage.
(iii) If it is determined that a district's current computed
millage is sufficient to pay all qualified loans by the mandatory
final
loan repayment date, no recalculation of change to the
district's computed millage is required.
(b) "Final mandatory repayment date" means the final mandatory
repayment date determined by the state treasurer under section 9.
(c) "Michigan finance authority" means the Michigan finance
authority created under Executive Reorganization Order No. 2010-2,
MCL 12.194.
(d) "Qualified bond" means a bond that is qualified under this
act for state loans as provided in section 16 of article IX of the
state constitution of 1963. A qualified bond includes the interest
amount required for payment of a school district's net interest
obligation under an interest rate exchange or swap, hedge, or other
agreement entered into pursuant to the revised municipal finance
act, 2001 PA 34, MCL 141.2101 to 141.2821, but does not include a
termination payment or similar payment related to the termination
or cancellation of an interest rate exchange or swap, hedge, or
other similar agreement. A qualified bond may include a bond issued
to refund loans owed to the state under this act.
(e) "Qualified loan" means a loan made under this act or
former 1961 PA 108 from this state to a school district to pay debt
service on a qualified bond.
(f) "Revolving loan fund" means the school loan revolving fund
created under section 16c of the shared credit rating act, 1985 PA
227, MCL 141.1066c.
(g) "School district" means a general powers school district
organized under the revised school code, 1976 PA 451, MCL 380.1 to
380.1852, or a school district of the first class as described in
the revised school code, 1976 PA 451, MCL 380.1 to 380.1852, having
the power to levy ad valorem property taxes.
(h) "State treasurer" means the state treasurer or his or her
duly authorized designee.
(i) "Taxable value" means the value determined under section
27a of the general property tax act, 1893 PA 206, MCL 211.27a.
Sec. 4. (1) A school district may issue and market bonds as
qualified bonds if the state treasurer has issued an order granting
qualification under this act.
(2) Except with regard to qualification of new bonds, nothing
in this act shall be construed to alter the terms and conditions
applicable to outstanding qualified bonds issued in accordance with
former 1961 PA 108. Unless otherwise amended as permitted by this
act, outstanding qualified loans incurred in association with
outstanding qualified bonds described in this subsection shall bear
interest as provided in section 9(8) but otherwise shall be due and
payable as provided in the repayment agreements entered into
between the school district and the state before the effective date
of this act.
(3) The state treasurer may qualify bonds for which the state
treasurer
has received an application for prequalification
preliminary qualification on or before May 25, 2005 without regard
to the requirements of section 5(2)(f) if the electors of the
school district approve the bonds at an election held during 2005.
Sec. 5. (1) A school district may apply to the state treasurer
for preliminary qualification of a proposed school bond issue by
filing an application in the form and containing the information
required by this act.
(2) An application for preliminary qualification of a school
bond shall contain all of the following information:
(a) The proposed ballot language to be submitted to the
electors.
(b) A description of the project or projects proposed to be
financed.
(c) A pro forma debt service projection showing the estimated
mills
computed millage the school district will levy to provide
revenue the school district will use to pay the qualified bonds,
any outstanding qualified bonds, and any outstanding or projected
qualified loans of the school district. For the purpose of the pro
forma debt service projection, the school district may assume for
the first 5 years following the date of the application the average
growth or decline in taxable value for the 5 years or such other
period of time requested by the school district if approved by the
state treasurer preceding the date of the application and the
average growth or decline rate for the 20 years immediately
preceeding
preceding the date of the application but not more than
3% or less than 0% growth rate, for the remaining term of the
proposed bonds.
(d) Evidence that the rate of utilization of each project to
be financed will be at least 85% for new buildings and 60% for
renovated facilities. If the projected enrollment of the district
would not otherwise support utilization at the rates described in
this subsection, the school district may include an explanation of
the actions the school district intends to take to address the
underutilization, including, if applicable, actions to close school
buildings or other actions designed to assure continued assured use
of the facilities being financed.
(e) Evidence that the cost per square foot of the project or
projects will be reasonable in light of economic conditions
applicable to the geographic area in which the school district is
located.
(f) Evidence that the school district will repay all
outstanding qualified bonds, the proposed qualified bonds, all
outstanding qualified loans, and all qualified loans expected to be
incurred with respect to all qualified bonds of the school
district, including the proposed qualified bond issue, not later
than the applicable final mandatory repayment date.
(g) The overall utilization rate of all school buildings in
the school district, excluding special education purposes.
(h) The total bonded debt outstanding of the school district
and the total taxable value of property in the school district for
the school district fiscal year in which the application is filed.
(i) A statement describing any environmental or usability
problems to be addressed by the project or projects.
(j) An architect's analysis of the overall condition of the
facilities to be renovated or replaced as a part of the project or
projects.
(k) An amortization schedule demonstrating that the weighted
average maturity of the qualified bond issue does not exceed 120%
of the average reasonably expected useful life of the facilities,
excluding land and site improvements, being financed or refinanced
with the proceeds of the qualified bonds, determined as of the
later of the date on which the qualified bonds will be issued or
the date on which each facility is expected to be placed in
service.
(l) An agreement that the school district will keep books and
records detailing the investment and expenditure of the proceeds of
the qualified bonds and, at the request of the state treasurer, the
school district will promptly, but not later than the date
specified in the request, which date shall be not less than 5
business days after the date of the request, submit information
requested by the state treasurer related to the detailed
information maintained by the school district as to the investment
and expenditure of the proceeds of its qualified bonds.
Sec.
6. (1) The state treasurer shall prequalify preliminarily
qualify bonds of a school district if the state treasurer
determines all of the following:
(a) The issuance of additional qualified bonds will not
prevent the school district from repaying its outstanding qualified
bonds, the proposed bonds, all outstanding qualified loans, and all
qualified loans expected to be incurred with respect to all
qualified bonds of the school district, including the proposed bond
issue, not later than the applicable final mandatory repayment
date.
(b) The form and language of the ballot conforms with the
requirements of this act.
(c) The school district has filed an application complying
with the requirements of section 5.
(d) If the proposed bond issue is approved by the voters after
September 30, 2012 and will result in additional qualified loans,
the outstanding balance of all qualified loans on the most recent
May
1 or November 1 did not exceed $1,800,000,000.00. The
$1,800,000,000.00
limitation described in the immediately preceding
sentence
does not apply after June 30, 2016.
(e) The issuance of additional qualified bonds approved by
voters after September 30, 2012 will not have an adverse financial
impact on the school district, this state, or the school loan
revolving fund. In making this determination, the state treasurer
shall consider relevant factors, including, but not limited to,
whether the issuance of the proposed bond issue will cause the
aggregate outstanding amount of qualified and nonqualified bonds,
including the proposed bond issue, and currently outstanding
qualified loans of the school district to exceed 25% of the taxable
value of the school district at the time the proposed bonds are
issued.
(2) Any preliminary qualification issued by the state
treasurer shall expire 10 years after the date of its issuance or
upon a sooner date stated in the preliminary qualification order.
Sec. 7. (1) The state treasurer shall qualify bonds of a
school district if the state treasurer determines all of the
following:
(a) A majority of the school district electors have approved
the bonds.
(b) The terms of the bond issue comply with applicable
provisions of the revised school code, 1976 PA 451, MCL 380.1 to
380.1852.
(c) The school district is in compliance with the revised
municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.
(d) The weighted average maturity of the qualified bond issue
does not exceed 120% of the average reasonably expected useful life
of the facilities, excluding land and site improvements, being
financed or refinanced with the proceeds of the bonds, determined
as of the later of the date on which the qualified bonds will be
issued or the date on which each facility is expected to be placed
in service.
(e) The school district has filed any information necessary to
update the contents of the original application to reflect changes
in any of the information approved in the preliminary qualification
process, and those changes, including bond structure, estimated
borrowing, and project scope, are not substantially different.
(f) The school district has agreed that the school district
will keep books and records detailing the investment and
expenditure of the proceeds of the qualified bonds and, at the
request of the state treasurer, the school district will promptly,
but not later than the date specified in the request, which date
shall be not less than 5 business days after the date of the
request, submit information requested by the state treasurer
related to the detailed information maintained by the school
district as to the investment and expenditure of the proceeds of
its qualified bonds.
(g) The preliminary qualification order pursuant to which
qualification is being sought is still effective.
(2) An order qualifying bonds shall specify the principal and
interest payment dates for all the bonds, the maximum principal
amount of and maximum interest rate on the bonds, the computed
millage,
if any, the final mandatory repayment date, and other
matters as the state treasurer shall determine or as are required
by this act.
(3)
If the application for prequalification preliminary
qualification demonstrates that the school district will borrow
from this state in accordance with this act, the state treasurer
and the school district shall enter into a loan agreement setting
forth the terms and conditions of any qualified loans to be made to
the school district under this act.
(4) If a school district does not issue its qualified bonds
within 180 days after the date of the order qualifying bonds, the
order shall no longer be effective. However, the school district
may reapply for qualification by filing an application and
information necessary to update the contents of the original
application for prequalification or qualification.
(5) The state treasurer shall qualify refunding bonds issued
to refund qualified loans or qualified bonds if the state treasurer
finds that all of the following are met:
(a) The refunding bonds comply with the provisions of the
revised municipal finance act, 2001 PA 34, MCL 141.2101 to
141.2821.
(b) That the school district will repay all outstanding
qualified bonds, the proposed qualified bonds, all outstanding
qualified loans, and all qualified loans expected to be incurred
with respect to all qualified bonds of the school district,
including the proposed qualified bond issue, not later than the
applicable final mandatory repayment date.
Sec. 8. (1) A ballot submitted to the school electors of a
school district after November 8, 2005 requesting authorization to
issue unlimited tax general obligations that will be guaranteed by
this state in accordance with section 16 of article IX of the state
constitution
of 1963 shall inform the electors that if at a minimum
of all the following:
(a) Clear descriptions of the purposes for which the proceeds
of the bonds will be used.
(b) Whether the school district expects to borrow from this
state
to pay debt service on the bonds.
, the
(c) If the school district expects to borrow from this state
to pay debt service of the bonds the estimated total amount of the
principal
of that borrowing and the interest to be paid on that
borrowing. ,
(d) The current computed millage, the estimated average annual
computed millage accounting for the proposed bonds and any
borrowing,
and the estimated duration of the
millage levy. , and
the
estimated computed millage rate for that levy. The ballot shall
also
inform the electors of the
(e) The total amount of qualified bond and loan debt currently
outstanding. and
(f) A statement that the estimated computed millage rate and
duration may change based on changes in certain circumstances.
(2) Anything contained in the ballot not specified in this
section shall be considered surplusage and of no legal effect.
(3) The ballot language shall be subject to final department
of treasury approval and shall contain such additional information
as the department of treasury deems necessary to ensure full
disclosure to the voters.
Sec. 9. (1) Except as otherwise provided in this act, a school
district may borrow from the state an amount not greater than the
difference between the proceeds of the school district's computed
millage and the amount necessary to pay principal and interest on
its qualified bonds, including any necessary allowances for
estimated tax delinquencies. The computed millage for any district
upon receiving a qualified loan regardless of how it is provided
pursuant to this act, or with an outstanding qualified loan
balance, shall be 7 mills or the district's actual computed
millage, whichever is higher.
(2) For school districts having qualified loans outstanding as
of July 20, 2005, the state treasurer shall review information
relating to each school district regarding the taxable value of the
school district and the actual debt service of outstanding
qualified bonds as of July 20, 2005 and shall issue an order
establishing the payment date for all those outstanding qualified
loans and any additional qualified loans expected to be incurred by
those school districts related to qualified bonds issued before
July 20, 2005. The payment date shall be not later than 72 months
after the date on which the qualified bonds most recently issued by
the school district are due and payable. The payment date
established pursuant to this subsection for a school district is a
final mandatory repayment date.
(3) For qualified loans related to qualified bonds issued
after July 20, 2005, the qualified loans shall be due 72 months
after the date on which the qualified bonds for which the school
borrowed from this state are due and payable. The due date
determined pursuant to this subsection for a school district is a
final mandatory repayment date. This section does not preclude
early repayment of qualified bonds or qualified loans.
(4) The state treasurer shall maintain separate accounts for
each school district on the books and accounts of this state noting
the qualified bond, the related qualified loans, the final payment
date of the bonds, the final mandatory repayment date of the
qualified loans, and the interest rate accrued on the loans.
(5) For qualified loans relating to qualified bonds issued
after
July 20, 2005, a school district shall continue to levy the a
computed millage until it has completely repaid all principal and
interest on its qualified loans.
(6) For qualified loans relating to qualified bonds issued
before July 20, 2005, a school district shall continue to comply
with the levy and repayment requirements imposed before July 20,
2005. Not less than 90 days after July 20, 2005, the state
treasurer and the school district shall enter into amended and
restated repayment agreements to incorporate the levy and repayment
requirements applicable to qualified loans issued before July 20,
2005.
(7) Upon the request of a school district made before June 1
of any year, the state treasurer annually may waive all or a
portion of the millage required to be levied by a school district
to pay principal and interest on its qualified bonds or qualified
loans under this section if the state treasurer finds all of the
following:
(a) The school board of the school district has applied to the
state treasurer for permission to levy less than the millage
required to be levied to pay the principal and interest on its
qualified bonds or qualified loans under subsection (1).
(b) The application specifies the number of mills the school
district requests permission to levy.
(c) The waiver will be financially beneficial to this state,
the school district, or both.
(d) The waiver will not reduce the computed millage levied by
the school district to pay principal and interest on qualified
bonds or qualified loans under this act to less than 7 mills.
(e) The board of the school district, by resolution, has
agreed to comply with all conditions that the state treasurer
considers necessary.
(8) All qualified loans shall bear interest at 1 of the
following rates:
(a) The greater of 3% or the average annual cost of funds used
to make qualified loans plus 0.125%, but not less than the cost of
funds on outstanding qualified notes and bonds issued by the
Michigan finance authority to finance loans computed by the state
treasurer not less often than annually.
(b) A lesser rate determined by the state treasurer to be
necessary to maintain the exemption from federal income tax of
interest on any bonds or notes issued to fund qualified loans.
(c) A higher rate determined by the state treasurer to be
necessary to prevent the impairment of any contract of this state
or the Michigan finance authority in existence on the effective
date of the amendatory act that added this subdivision.
(9) A payment date determined under subsection (2) or a due
date determined under subsection (3) is a final mandatory repayment
date. Once established for a school district as provided in this
section, a final mandatory repayment date shall apply to all
qualified loans of the school district, whenever made, until 30
days after the date the school district has no outstanding
qualified loans and no outstanding debt incurred to refund
qualified loans. Notwithstanding this subsection, the state
treasurer may determine a later mandatory repayment date for a
school district that agrees to levy a higher millage, acceptable to
the
state treasurer, not to exceed 13 mills, than its existing
current computed millage.
Sec. 11. The state treasurer may promulgate rules to implement
this act pursuant to the administrative procedures act of 1969,
1969 PA 306, MCL 24.201 to 24.328, and may issue guidelines or
bulletins
as authorized by this act.all
to further clarify the
application of this act and any related rules.
Sec. 12. If a school district does not apply for
prequalification
preliminary qualification or qualification or
approval of a bond issue before the issuance of those bonds, the
state treasurer shall not approve or qualify those bonds as
qualified bonds under this act.
Sec. 14. (1) If any paying agent for a school district's
qualified bonds notifies the state treasurer that the school
district has failed to deposit sufficient funds to pay principal
and interest due on the qualified bonds when due, or if a
bondholder notifies the state treasurer that the school district
has failed to pay principal or interest on qualified bonds when
due, whether or not the school district has filed a draw request
with the state treasurer, the state treasurer shall promptly pay
the
principal or interest on the qualified bond. when due.
(2) If the state treasurer pays any amount described in this
section, the state treasurer shall bill the school district for the
amount paid and the school district shall immediately remit the
amount to the state treasurer. If the school district would have
been eligible to borrow the debt service in accordance with the
terms of this act, the school district shall enter into a loan
agreement establishing the terms of the qualified loan as provided
in
this act. If the state treasurer directs the Michigan municipal
bond
finance authority or
its successor to pay any amount
described
in this section, the state treasurer shall cause the Michigan
municipal
bond finance authority to bill the school district for
the amount paid and the school district shall immediately remit the
amount
to the Michigan municipal bond finance
authority.
Sec.
16. (1) The state treasurer may charge a prequalification
preliminary qualification application fee, a qualification
application fee, and an annual loan activity fee in the amounts
determined by the state treasurer to be required to pay the
estimated administrative expenses incurred under this act for the
fiscal year in which the state treasurer imposes the fee.
(2) The state treasurer shall deposit all fees collected under
this act into a separate fund established within the state
treasury, and shall use the proceeds of the fees solely for the
purpose of administering and enforcing this act. The unexpended and
unobligated balance of this fund at the end of each state fiscal
year shall be carried forward over to the succeeding state fiscal
year and shall not lapse to the general fund but shall be available
for reappropriation for the next state fiscal year.