Bill Text: MI SB0314 | 2019-2020 | 100th Legislature | Introduced

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Bill Title: Local government; financing; responsibility for obligations issued with the approval of an emergency manager; modify. Amends secs. 12 & 14 of 2012 PA 436 (MCL 141.1552 & 141.1554) & adds secs. 12a & 14a.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2019-05-09 - Referred To Committee On Government Operations [SB0314 Detail]

Download: Michigan-2019-SB0314-Introduced.html

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SENATE BILL No. 314

 

 

May 9, 2019, Introduced by Senator ALEXANDER and referred to the Committee on Government Operations.

 

 

 

     A bill to amend 2012 PA 436, entitled

 

"Local financial stability and choice act,"

 

by amending sections 12 and 14 (MCL 141.1552 and 141.1554), and by

 

adding sections 12a and 14a.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 12. (1) An emergency manager may take 1 or more of the

 

following additional actions with respect to a local government

 

that is in receivership, notwithstanding any charter provision to

 

the contrary:

 

     (a) Analyze factors and circumstances contributing to the

 

financial emergency of the local government and initiate steps to

 

correct the condition.

 

     (b) Amend, revise, approve, or disapprove the budget of the

local government, and limit the total amount appropriated or

 

expended.

 

     (c) Receive and disburse on behalf of the local government all

 

federal, state, and local funds earmarked for the local government.

 

These funds may include, but are not limited to, funds for specific

 

programs and the retirement of debt.

 

     (d) Require and approve or disapprove, or amend or revise, a

 

plan for paying all outstanding obligations of the local

 

government.

 

     (e) Require and prescribe the form of special reports to be

 

made by the finance officer of the local government to its

 

governing body, the creditors of the local government, the

 

emergency manager, or the public.

 

     (f) Examine all records and books of account, and require

 

under the procedures of the uniform budgeting and accounting act,

 

1968 PA 2, MCL 141.421 to 141.440a, or 1919 PA 71, MCL 21.41 to

 

21.55, or both, the attendance of witnesses and the production of

 

books, papers, contracts, and other documents relevant to an

 

analysis of the financial condition of the local government.

 

     (g) Make, approve, or disapprove any appropriation, contract,

 

expenditure, or loan, the creation of any new position, or the

 

filling of any vacancy in a position by any appointing authority.

 

     (h) Review payrolls or other claims against the local

 

government before payment.

 

     (i) Notwithstanding any minimum staffing level requirement

 

established by charter or contract, establish and implement

 

staffing levels for the local government.

     (j) Reject, modify, or terminate 1 or more terms and

 

conditions of an existing contract.

 

     (k) Subject to section 19, after meeting and conferring with

 

the appropriate bargaining representative and, if in the emergency

 

manager's sole discretion and judgment, a prompt and satisfactory

 

resolution is unlikely to be obtained, reject, modify, or terminate

 

1 or more terms and conditions of an existing collective bargaining

 

agreement. The rejection, modification, or termination of 1 or more

 

terms and conditions of an existing collective bargaining agreement

 

under this subdivision is a legitimate exercise of the state's

 

sovereign powers if the emergency manager and state treasurer

 

determine that all of the following conditions are satisfied:

 

     (i) The financial emergency in the local government has

 

created a circumstance in which it is reasonable and necessary for

 

the state to intercede to serve a significant and legitimate public

 

purpose.

 

     (ii) Any plan involving the rejection, modification, or

 

termination of 1 or more terms and conditions of an existing

 

collective bargaining agreement is reasonable and necessary to deal

 

with a broad, generalized economic problem.

 

     (iii) Any plan involving the rejection, modification, or

 

termination of 1 or more terms and conditions of an existing

 

collective bargaining agreement is directly related to and designed

 

to address the financial emergency for the benefit of the public as

 

a whole.

 

     (iv) Any plan involving the rejection, modification, or

 

termination of 1 or more terms and conditions of an existing

collective bargaining agreement is temporary and does not target

 

specific classes of employees.

 

     (l) Act as sole agent of the local government in collective

 

bargaining with employees or representatives and approve any

 

contract or agreement.

 

     (m) If a municipal government's pension fund is not

 

actuarially funded at a level of 80% or more, according to the most

 

recent governmental accounting standards board's applicable

 

standards, at the time the most recent comprehensive annual

 

financial report for the municipal government or its pension fund

 

was due, the emergency manager may remove 1 or more of the serving

 

trustees of the local pension board or, if the state treasurer

 

appoints the emergency manager as the sole trustee of the local

 

pension board, replace all the serving trustees of the local

 

pension board. For the purpose of determining the pension fund

 

level under this subdivision, the valuation shall must exclude the

 

net value of pension bonds or evidence of indebtedness. The annual

 

actuarial valuation for the municipal government's pension fund

 

shall must use the actuarial accrued liabilities and the actuarial

 

value of assets. If a pension fund uses the aggregate actuarial

 

cost method or a method involving a frozen accrued liability, the

 

retirement system actuary shall use the entry age normal actuarial

 

cost method. If the emergency manager serves as sole trustee of the

 

local pension board, all of the following apply:

 

     (i) The emergency manager shall assume and exercise the

 

authority and fiduciary responsibilities of the local pension board

 

including, to the extent applicable, setting and approval of all

actuarial assumptions for pension obligations of a municipal

 

government to the local pension fund.

 

     (ii) The emergency manager shall fully comply with the public

 

employee retirement system investment act, 1965 PA 314, MCL 38.1132

 

to 38.1140m, 38.1141, and section 24 of article IX of the state

 

constitution of 1963, and any actions taken shall must be

 

consistent with the pension fund's qualified plan status under the

 

federal internal revenue code.

 

     (iii) The emergency manager shall not make changes to a local

 

pension fund without identifying the changes and the costs and

 

benefits associated with the changes and receiving the state

 

treasurer's approval for the changes. If a change includes the

 

transfer of funds from 1 pension fund to another pension fund, the

 

valuation of the pension fund receiving the transfer must be

 

actuarially funded at a level of 80% or more, according to the most

 

recent governmental accounting standards board's Governmental

 

Accounting Standards Board's applicable standards, at the time the

 

most recent comprehensive annual financial report for the municipal

 

government was due.

 

     (iv) The emergency manager's assumption and exercise of the

 

authority and fiduciary responsibilities of the local pension board

 

shall must end not later than the termination of the receivership

 

of the municipal government as provided in this act.

 

     (n) Consolidate or eliminate departments of the local

 

government or transfer functions from 1 department to another and

 

appoint, supervise, and, at his or her discretion, remove

 

administrators, including heads of departments other than elected

officials.

 

     (o) Employ or contract for, at the expense of the local

 

government and with the approval of the state financial authority,

 

auditors and other technical personnel considered necessary to

 

implement this act.

 

     (p) Retain 1 or more persons or firms, which that may be an

 

individual or firm selected from a list approved by the state

 

treasurer, to perform the duties of a local inspector or a local

 

auditor as described in this subdivision. The duties of a local

 

inspector are to assure integrity, economy, efficiency, and

 

effectiveness in the operations of the local government by

 

conducting meaningful and accurate investigations and forensic

 

audits, and to detect and deter waste, fraud, and abuse. At least

 

annually, a report of the local inspector shall must be submitted

 

to the emergency manager, the state treasurer, the superintendent

 

of public instruction if the local government is a school district,

 

and each state senator and state representative who represents that

 

local government. The annual report of the local inspector shall

 

must be posted on the local government's website within 7 days

 

after the report is submitted. The duties of a local auditor are to

 

assure that internal controls over local government operations are

 

designed and operating effectively to mitigate risks that hamper

 

the achievement of the emergency manager's financial plan, assure

 

that local government operations are effective and efficient,

 

assure that financial information is accurate, reliable, and

 

timely, comply with policies, regulations, and applicable laws, and

 

assure assets are properly managed. At least annually, a report of

the local auditor shall must be submitted to the emergency manager,

 

the state treasurer, the superintendent of public instruction if

 

the local government is a school district, and each state senator

 

and state representative who represents that local government. The

 

annual report of the local auditor shall must be posted on the

 

local government's website within 7 days after the report is

 

submitted.

 

     (q) An emergency manager may initiate Initiate court

 

proceedings in the Michigan court of claims or in the circuit court

 

of the county in which the local government is located in the name

 

of the local government to enforce compliance with any of his or

 

her orders or any constitutional or legislative mandates, or to

 

restrain violations of any constitutional or legislative power or

 

his or her orders.

 

     (r) Subject to section 19, if provided in the financial and

 

operating plan, or otherwise with the prior written approval of the

 

governor or his or her designee, sell, lease, convey, assign, or

 

otherwise use or transfer the assets, liabilities, functions, or

 

responsibilities of the local government, provided the use or

 

transfer of assets, liabilities, functions, or responsibilities for

 

this purpose does not endanger the health, safety, or welfare of

 

residents of the local government or unconstitutionally impair a

 

bond, note, security, or uncontested legal obligation of the local

 

government.

 

     (s) Apply for a loan from the state on behalf of the local

 

government, subject to the conditions of the emergency municipal

 

loan act, 1980 PA 243, MCL 141.931 to 141.942.

     (t) Order, as necessary, 1 or more millage elections for the

 

local government consistent with the Michigan election law, 1954 PA

 

116, MCL 168.1 to 168.992, sections 6 and 25 through 34 of article

 

IX of the state constitution of 1963, and any other applicable

 

state law.

 

     (u) Subject to section 19, authorize the borrowing of money by

 

the local government as provided by law.

 

     (v) Approve Subject to sections 12a and 14a, approve or

 

disapprove of the issuance of issuing obligations of the local

 

government on behalf of the local government under this

 

subdivision. An election to approve or disapprove of the issuance

 

of issuing obligations of the local government pursuant to under

 

this subdivision shall must only be held at the general November

 

election.

 

     (w) Enter into agreements with creditors or other persons or

 

entities for the payment of existing debts, including the

 

settlement of claims by the creditors.

 

     (x) Enter into agreements with creditors or other persons or

 

entities to restructure debt on terms, at rates of interest, and

 

with security as shall be is agreed among the parties, subject to

 

approval by the state treasurer.

 

     (y) Enter into agreements with other local governments, public

 

bodies, or entities for the provision of services, the joint

 

exercise of powers, or the transfer of functions and

 

responsibilities.

 

     (z) For municipal governments, enter into agreements with

 

other units of municipal government to transfer property of the

municipal government under 1984 PA 425, MCL 124.21 to 124.30, or as

 

otherwise provided by law, subject to approval by the state

 

treasurer.

 

     (aa) Enter into agreements with 1 or more other local

 

governments or public bodies for the consolidation of services.

 

     (bb) For a city, village, or township, the emergency manager

 

may recommend to the state boundary commission that the municipal

 

government consolidate with 1 or more other municipal governments,

 

if the emergency manager determines that consolidation would

 

materially alleviate the financial emergency of the municipal

 

government and would not materially and adversely affect the

 

financial situation of the government or governments with which the

 

municipal government in receivership is consolidated. Consolidation

 

under this subdivision shall must proceed as provided by law.

 

     (cc) For municipal governments, with approval of the governor,

 

disincorporate or dissolve the municipal government and assign its

 

assets, debts, and liabilities as provided by law. The

 

disincorporation or dissolution of the local government is subject

 

to a vote of the electors of that local government if required by

 

law.

 

     (dd) Exercise solely, for and on behalf of the local

 

government, all other authority and responsibilities of the chief

 

administrative officer and governing body concerning the adoption,

 

amendment, and enforcement of ordinances or resolutions of the

 

local government as provided in the following acts:

 

     (i) The home rule city act, 1909 PA 279, MCL 117.1 to 117.38.

 

     (ii) The fourth class city act, 1895 PA 215, MCL 81.1 to

113.20.

 

     (iii) The charter township act, 1947 PA 359, MCL 42.1 to

 

42.34.

 

     (iv) 1851 PA 156, MCL 46.1 to 46.32.

 

     (v) 1966 PA 293, MCL 45.501 to 45.521.

 

     (vi) The general law village act, 1895 PA 3, MCL 61.1 to

 

74.25.

 

     (vii) The home rule village act, 1909 PA 278, MCL 78.1 to

 

78.28.

 

     (viii) The revised school code, 1976 PA 451, MCL 380.1 to

 

380.1852.

 

     (ix) The state school aid act of 1979, 1979 PA 94, MCL

 

388.1601 to 388.1896.388.1897l.

 

     (ee) Take any other action or exercise any power or authority

 

of any officer, employee, department, board, commission, or other

 

similar entity of the local government, whether elected or

 

appointed, relating to the operation of the local government. The

 

power of the emergency manager shall be is superior to and

 

supersede supersedes the power of any of the foregoing officers or

 

entities.

 

     (ff) Remove, replace, appoint, or confirm the appointments to

 

any office, board, commission, authority, or other entity which

 

that is within or is a component unit of the local government.

 

     (2) Except as otherwise provided in this act, during the

 

pendency of the receivership, the authority of the chief

 

administrative officer and governing body to exercise power for and

 

on behalf of the local government under law, charter, and ordinance

shall be is suspended and vested in the emergency manager.

 

     (3) Except as otherwise provided in this subsection, any

 

contract involving a cumulative value of $50,000.00 or more is

 

subject to competitive bidding by an emergency manager. However, if

 

a potential contract involves a cumulative value of $50,000.00 or

 

more, the emergency manager may submit the potential contract to

 

the state treasurer for review and the state treasurer may

 

authorize that the potential contract is not subject to competitive

 

bidding.

 

     (4) An emergency manager appointed for a city or village shall

 

not sell or transfer a public utility furnishing light, heat, or

 

power without the approval of a majority of the electors of the

 

city or village voting thereon, or a greater number if the city or

 

village charter provides, as required by section 25 of article VII

 

of the state constitution of 1963. In addition, an emergency

 

manager appointed for a city or village shall not utilize the

 

assets of a public utility furnishing heat, light, or power, the

 

finances of which are separately maintained and accounted for by

 

the city or village, to satisfy the general obligations of the city

 

or village.

 

     Sec. 12a. (1) If, before the effective date of the amendatory

 

act that added this section, an emergency manager appointed for a

 

municipal government approves of issuing an obligation as provided

 

in section 12(1)(v), upon termination of the receivership this

 

state shall pay, assume, or refund the remaining amount of that

 

obligation.

 

     (2) If, on or after the effective date of the amendatory act

that added this section, an emergency manager appointed for a

 

municipal government approves of issuing an obligation as provided

 

in section 12(1)(v), that obligation must be issued on behalf of

 

and in the name of this state or a department or agency of this

 

state.

 

     Sec. 14. In addition to the actions otherwise authorized in

 

this act, an emergency manager for a school district may take 1 or

 

more of the following additional actions with respect to a school

 

district that is in receivership:

 

     (a) Negotiate, renegotiate, approve, and enter into contracts

 

on behalf of the school district.

 

     (b) Receive and disburse on behalf of the school district all

 

federal, state, and local funds earmarked for the school district.

 

These funds may include, but are not limited to, funds for specific

 

programs and the retirement of debt.

 

     (c) Seek approval from the superintendent of public

 

instruction for a reduced class schedule in accordance with

 

administrative rules governing the distribution of state school

 

aid.

 

     (d) Subject to section 19, sell, assign, transfer, or

 

otherwise use the assets of the school district to meet past or

 

current obligations or assure the fiscal accountability of the

 

school district, provided the use, assignment, or transfer of

 

assets for this purpose does not impair the education of the pupils

 

of the school district. The power under this subdivision includes

 

the closing of schools or other school buildings in the school

 

district.

     (e) Approve Subject to section 14a, approve or disapprove of

 

the issuance of issuing obligations of the school district.

 

     (f) Exercise solely, for and on behalf of the school district,

 

all other authority and responsibilities affecting the school

 

district that are prescribed by law to the school board and

 

superintendent of the school district.

 

     (g) With the approval of the state treasurer, employ or

 

contract for, at the expense of the school district, school

 

administrators considered necessary to implement this act.

 

     Sec. 14a. (1) If, before the effective date of the amendatory

 

act that added this section, an emergency manager appointed for a

 

school district approves of issuing an obligation as provided in

 

section 14(e), upon termination of the receivership this state

 

shall pay, assume, or refund the remaining amount of that

 

obligation.

 

     (2) If, on or after the effective date of the amendatory act

 

that added this section, an emergency manager appointed for a

 

school district approves of issuing an obligation as provided in

 

section 14(e), that obligation must be issued on behalf of and in

 

the name of this state or a department or agency of this state.