SB-0838, As Passed Senate, December 5, 2018

SUBSTITUTE FOR

SENATE BILL NO. 838

A bill to amend 2001 PA 34, entitled

"Revised municipal finance act,"

by amending section 518 (MCL 141.2518), as amended by 2015 PA 46.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 518. (1) Through December 31, ~~2018,~~ 2020, 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, ~~2018,~~ 2020, 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.

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 pension

liability or unfunded health care liability, or both, shall be

deposited in a pension trust fund, a health care trust fund, a

trust created by ~~the issuer~~ a county, city, village, or township

which has as its beneficiary a health care trust fund, a trust

created by a county, city, village, or township which has as its

beneficiary a pension 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).~~ (2). A county, city, village, or township shall have the

power to create a trust to carry out the purposes of this

subsection. ~~The~~ A trust created under this subsection shall invest

its funds in the ~~same manner as funds invested by a health care~~

~~trust fund. The~~ investment instruments and subject to the

investment limitations governing the investment of assets of public

employee retirement systems under the public employee retirement

system investment act, 1965 PA 314, MCL 38.1132 to 38.1141. A trust

~~created~~ or fund receiving proceeds of a municipal security under

this subsection ~~shall~~ must 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 of 1986.

(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 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.

(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.

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

municipal security under subsection (1) or (2), the county, city,

village, or township may issue a refunding security to refund that

municipal security under this section after December 31, 2018 if

that refunding security does not have a final maturity later than

the final maturity of the municipal security being refunded and if

the municipality that issued the municipal security has been

assigned a credit rating within the category of AA or higher or the

equivalent by at least 1 nationally recognized rating agency in

connection with the refunding security.

(13) As used in this section, "pension trust fund" means a

trust or fund established to fund the liabilities of a defined

benefit plan that is intended to qualify under section 401(a) of

the internal revenue code of 1986, 26 USC 401.