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SB-0407, As Passed Senate, June 8, 2005

SUBSTITUTE FOR

SENATE BILL NO. 407

A bill to amend 1985 PA 227, entitled

"Shared credit rating act,"

by amending the title and sections 3, 7, and 8 (MCL 141.1053,

141.1057, and 141.1058), the title and sections 3 and 7 as amended

by 2000 PA 416 and section 8 as amended by 2003 PA 109, and by

adding section 16c.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

An act to create the Michigan municipal bond authority and to

prescribe its powers and duties; to provide for the issuance of,

and terms and conditions for, notes and bonds of the authority; to

authorize certain forms of assistance to governmental units

including the creation and management of investments; to impose

conditions on, grant certain powers to political subdivisions of

~~the~~ this state and water suppliers regarding, and allow certain

agreements regarding obligations of this state, political

subdivisions of this state, and water suppliers purchased by the

authority or assigned to the authority; to exempt the property,

income, and operation of the authority, its bonds and notes, and

the interest on its bonds and notes from certain taxes; to grant

powers and impose duties on officers and agencies of ~~the~~ this

state, political subdivisions of this state, and water suppliers;

to accept and expend certain appropriations; and to repeal acts and

parts of acts.

Sec. 3. As used in this act:

(a) "Authority" means the Michigan municipal bond authority

created in section 4.

(b) "Board" means the board of trustees of the authority

established in section 5.

with a maturity greater than 3 years.

(d) "Capitalization grant" means the federal grant made to

this state by the United States environmental protection agency for

either of the following purposes:

(i) For the purpose of establishing a state water pollution

control revolving fund, as provided in title VI of the federal

water pollution control act, ~~chapter 758, 101 Stat. 22,~~ 33

~~U.S.C.~~ USC 1381 to 1387.

(ii) For the purpose of establishing a state drinking water

revolving fund, as provided in section 1452 ~~of part E of title XIV~~

of the public health service act, 42 ~~U.S.C.~~ USC 300j-12.

(e) "Community water supply" means a community water supply as

defined in part 54 of the natural resources and environmental

protection act, 1994 PA 451, MCL 324.5401 to 324.5418.

(f) "Federal safe drinking water act" means title XIV of the

public health service act, chapter 373, 88 Stat. 1660.

(g) "Federal water pollution control act" means ~~chapter 758,~~

~~86 Stat. 816,~~ 33 ~~U.S.C.~~ USC 1251 to ~~1252, 1253 to 1254, 1255 to~~

~~1257, 1258 to 1263, 1265 to 1270, 1281, 1282 to 1293, 1294 to 1299,~~

~~1311 to 1313, 1314 to 1330, 1341 to 1345, 1361 to 1377, and 1381 to~~

1387.

(h) "Fully marketable form" means a municipal obligation duly

executed and accompanied by all of the following:

(i) An approving legal opinion of a bond counsel approved by

the authority and of nationally recognized standing in the field of

municipal law.

(ii) Closing documents in a form and substance satisfactory to

the authority. The executed municipal obligation ~~so executed~~ need

not be printed or lithographed nor be in more than 1 denomination.

(iii) Evidence that the pledge for payment of the municipal

obligation will be sufficient to pay the principal of and interest

on the municipal obligation when due.

(iv) For purposes of a project funded under section 16a, an

order of approval issued by the department of environmental quality

under part 53 of the natural resources and environmental protection

act, 1994 PA 451, MCL 324.5301 to 324.5316. The order shall state

that the project proposed by the governmental unit has been

approved for assistance by the department of environmental quality.

(v) For purposes of a community water supply or a noncommunity

water supply funded under section 16b, an order of approval issued

by the department of environmental quality under part 54 of the

natural resources and environmental protection act, 1994 PA 451,

MCL 324.5401 to 324.5418. The order shall state that the community

water supply or the noncommunity water supply proposed by the

governmental unit has been approved for assistance by the

department of environmental quality.

(i) "Governmental unit" means this state, a county, city,

township, village, school district, intermediate school district,

community college, public university, authority, district, any

other body corporate and politic or other political subdivision,

any agency or instrumentality of the foregoing, or any group self-

insurance pool formed pursuant to 1951 PA 35, MCL 124.1 to 124.13.

For purposes of a project funded under section 16a, governmental

unit includes an Indian tribe that has jurisdiction over

construction and operation of a project qualifying under ~~section~~

~~319 of title III of the federal water pollution control act,~~ 33

~~U.S.C.~~ USC 1329. For purposes of a community water supply or a

noncommunity water supply funded under section 16b, governmental

unit includes a community water supplier. A governmental unit does

not include a self-insurance pool unless the self-insurance pool

has filed a certification by an independent actuary that the

reserves set aside under section 7a of 1951 PA 35, MCL 124.7a, are

adequate for the payment of claims. A school district shall include

a public school academy established under the revised school code,

1976 PA 451, MCL 380.1 to 380.1852. Funds loaned to a public school

academy or a school district may not be used to finance the

purchase, construction, lease, or renovation of property owned,

directly or indirectly, by any officer, board member, or employee

of that public school.

(j) "Municipal obligation" means a bond or note or evidence of

debt issued by a governmental unit for a purpose authorized by law.

A municipal obligation includes loan repayment obligations from a

school district to this state with respect to a qualified loan made

under a school loan act that is assigned or otherwise transferred

by this state to the authority.

(k) "Noncommunity water supply" means a noncommunity water

supply as defined in part 54 of the natural resources and

environmental protection act, 1994 PA 451, MCL 324.5401 to

324.5418.

(l) "Notes" means an obligation of the authority issued as

provided in this act, including commercial paper, with a maturity

of 3 years or less.

(m) "Project" means a sewage treatment works project or a

nonpoint source project, or both, as defined in ~~the state clean~~

~~water assistance act~~ part 53 of the natural resources and

environmental protection act, 1994 PA 451, MCL 324.5301 to

324.5316.

(n) "Reserve fund" means a bond reserve fund or note reserve

fund created and established under section 16.

(o) "Revenues" means all fees, charges, money, profits,

payments of principal of or interest on municipal obligations and

other investments, gifts, grants, contributions, and all other

income derived or to be derived by the authority under this act.

(p) "School loan act" means an act to implement section 16 of

article IX of the state constitution of 1963, including, but not

limited to, 1961 PA 108, MCL 388.951 to 388.963, 1961 PA 112, MCL

388.981 to 388.985, and the school bond qualification, approval,

and loan act. For a qualified bond, as defined in 1961 PA 108, MCL

388.951 to 388.963, with a certificate of qualification from the

state treasurer issued prior to the effective date of the

amendatory act that added this subdivision, "school loan act" means

1961 PA 108, MCL 388.951 to 388.963. For a qualified bond as

defined in the school bond qualification, approval, and loan act

with a certificate of qualification or approval issued by the state

treasurer after the effective date of the school bond

qualification, approval, and loan act, school loan act means the

school bond qualification, approval, and loan act.

(q) ~~(p)~~ "Water supplier" means a water supplier as defined

in part 54 of the natural resources and environmental protection

act, 1994 PA 451, MCL 324.5401 to 324.5418.

Sec. 7. The board has all of the following powers:

(a) To adopt bylaws for the regulation of its affairs.

(b) To adopt an official seal.

state.

(d) To sue and be sued in its own name and to plead and be

impleaded.

(e) To loan money to a governmental unit, or to a nonprofit

corporation, trust, or similar entity for the benefit of a public

school academy, at a rate or rates as the authority determines and

to purchase and sell, and to commit to purchase and sell, municipal

obligations pursuant to this act.

(f) To borrow money and issue negotiable revenue bonds and

notes pursuant to this act.

(g) To make and enter into contracts and other instruments

necessary or incidental to the performance of its duties and the

exercise of its powers. By rotating the services of legal counsel,

the authority shall seek to increase the pool of nationally

recognized bond counsel.

(h) To receive and accept from any source grants or

contributions of money, property, or other things of value,

excluding appropriations from the general fund of this state except

for appropriations to be used for the benefit of public schools,

except for appropriations to a reserve fund established under

section 16, except for appropriations to the state water pollution

control revolving fund established under section 16a and except for

appropriations to the state drinking water revolving fund

established under section 16b, and except for appropriations to the

school loan revolving fund established under section 16c, to be

used, held, and applied only for the purposes for which the grants

and contributions were made.

(i) To do all acts necessary or convenient to carry out the

powers expressly granted.

(j) To require that final actions of the board are entered in

the journal for the board and that all writings prepared, owned,

used, in the possession of, or retained by the board in the

performance of an official function be made available to the public

in compliance with the freedom of information act, 1976 PA 442, MCL

15.231 to 15.246.

(k) To engage the services of private consultants on a

contract basis for rendering professional and technical assistance

and advice.

(l) To investigate and assess the infrastructure needs of this

state, current methods of financing infrastructure rehabilitation

and improvements, and resources and financing options currently

available and potentially useful to improve this state's

infrastructure and lower the costs of those improvements.

(m) To indemnify and procure insurance indemnifying members of

the board from personal loss or accountability from liability

asserted by a person on bonds or notes of the authority or from any

personal liability or accountability by reason of the issuance of

the bonds or notes, or by reason of any other action taken or the

failure to act by the authority.

(n) To investigate and assess short-term and long-term

borrowing requirements for operating, capital improvements, and

delinquent taxes.

(o) To provide assistance, as that term is defined in section

5301 of the natural resources and environmental protection act,

1994 PA 451, MCL 324.5301, to any municipality for a revolving fund

project and to perform all functions necessary or incident to

providing that assistance and to the operation of the state water

pollution control revolving fund established under section 16a.

(p) To enter into agreements with the federal government to

implement the establishment and operation of the state water

pollution control revolving fund established under section 16a

pursuant to the provisions of the federal water pollution control

act and the rules and regulations promulgated under that act.

(q) To provide assistance, as that term is defined in part 54

of the natural resources and environmental protection act, 1994 PA

451, MCL 324.5401 to 324.5418, to any governmental unit for a

revolving fund community water supply or noncommunity water supply

and to perform all functions necessary or incident to providing

that assistance and to the operation of the state drinking water

revolving fund established under section 16b, including, but not

limited to, using funding allocated in the federal safe drinking

water act for any of the purposes authorized in section 5417(c) of

the natural resources and environmental protection act, 1994 PA

451, MCL 324.5417.

(r) To enter into agreements with the federal government to

establish and operate the state drinking water revolving fund under

section 16b pursuant to the provisions of the federal safe drinking

water act and the rules and regulations promulgated under that act.

(s) To enter into agreements with the state treasurer to act

as this state's agent to implement the establishment and operation

of the school loan revolving fund established under section 16c,

including provisions relating to the return to this state of

contributions made by this state for deposit in the school loan

revolving fund that are no longer needed for school loan revolving

fund purposes.

Sec. 8. (1) The authority may lend money to a governmental

unit through the purchase by the authority of municipal obligations

of the governmental unit in fully marketable form. The authority

may authorize and issue its bonds or notes payable solely from the

revenues or funds available to the authority, and to otherwise

assist governmental units.

(2) Bonds and notes of the authority shall not be in any way a

debt or liability of this state and shall not create or constitute

any indebtedness, liability, or obligations of this state or be or

constitute a pledge of the faith and credit of this state but all

authority bonds and notes, unless funded or refunded by bonds or

notes of the authority, shall be payable solely from revenues or

funds pledged or available for their payment as authorized in this

act. Each bond and note shall contain on its face a statement to

the effect that the authority is obligated to pay the principal of

and the interest on the bond or note only from revenues or funds of

the authority and that this state is not obligated to pay the

principal or interest and that neither the faith and credit nor the

taxing power of this state is pledged to the payment of the

principal of or the interest on the bond or note.

(3) All expenses incurred in carrying out ~~the provisions of~~

this act shall be payable solely from revenues or funds provided or

to be provided under the provisions of this act, and nothing in

this act shall be construed to authorize the authority to incur any

indebtedness or liability on behalf of or payable by this state.

(4) Unless approved by a concurrent resolution of the

legislature and except as permitted by section 16a, or 16b, or

16c, the authority shall not provide preferential treatment in the

rate of interest for a particular municipal obligation purchased by

the authority that is based upon other than financial and credit

considerations and shall not forgive or relinquish all or part of

the interest or principal of a particular municipal obligation or

of municipal obligations of a particular purpose.

(5) The authority may purchase bonds issued by school

districts that are qualified bonds under ~~1961 PA 108, MCL 388.951~~

~~to 388.963~~ a school loan act. Except as provided in subsection

(6), the principal amount of the qualified bonds purchased by the

authority in any calendar year shall not exceed 7.5% of the

principal amount of qualified bonds issued by school districts in

the immediately preceding calendar year. The authority may also

purchase or accept by assignment from this state municipal

obligations that are loan repayment obligations from a school

district on a qualified loan made by this state under a school loan

act. Municipal obligations acquired by the authority under this

subsection are not required to be in fully marketable form.

(6) In addition to qualified bonds purchased under subsection

(5), the authority may purchase qualified bonds issued by school

districts not later than September 30, 2004 to obtain funds to

repay all or a portion of the outstanding balance of a loan under

1961 PA 108, MCL 388.951 to 388.963, on the terms and conditions

and subject to the requirements provided by or pursuant to a

resolution of the authority. Bonds issued by the authority to

purchase school district qualified bonds under this subsection

shall be issued in an amount sufficient to provide and pay the

reasonable costs of issuance incurred by the school districts as

determined by or pursuant to a resolution of the authority.

Sec. 16c. The authority shall establish a school loan

revolving fund and shall establish accounts and subaccounts with

the school loan revolving fund as it determines is necessary or

appropriate to operate the school loan revolving fund. The

authority may fund the school loan revolving fund with proceeds of

bonds or notes issued by the authority, revenues of the authority,

contributions from this state including contributions resulting

from the assignment of the right to receive loan repayments on

qualified loans made or authorized by this state under a school

loan act, or repayments of loans made from the school loan

revolving fund. Funds deposited in the school loan revolving fund

may be used only by the authority to make qualified loans to school

districts at the times and in the amounts approved by this state

under the provisions of a school loan act, for the purpose of

funding a reserve fund established by the authority, for the

purpose of securing bonds or notes issued by the authority to

provide funds for the school loan revolving fund, for the purpose

of acting as a surety for the payment of bonds or notes that

provide direct or indirect state sponsorship or support to a school

district, and for the purpose of paying the costs of the authority

to administer the fund. Loans to school districts from the school

loan revolving fund with respect to qualified bonds as defined in a

school loan act shall be treated as state loans as described in

section 16 of article IX of the state constitution of 1963.

Enacting section 1. This amendatory act does not take effect

unless all of the following bills of the 93rd Legislature are

enacted into law: