HB-5167, As Passed House, May 8, 2014

SUBSTITUTE FOR

HOUSE BILL NO. 5167

     A bill to amend 1951 PA 51, entitled

"An act to provide for the classification of all public roads,

streets, and highways in this state, and for the revision of that

classification and for additions to and deletions from each

classification; to set up and establish the Michigan transportation

fund; to provide for the deposits in the Michigan transportation

fund of specific taxes on motor vehicles and motor vehicle fuels;

to provide for the allocation of funds from the Michigan

transportation fund and the use and administration of the fund for

transportation purposes; to promote safe and efficient travel for

motor vehicle drivers, bicyclists, pedestrians, and other legal

users of roads, streets, and highways; to set up and establish the

truck safety fund; to provide for the allocation of funds from the

truck safety fund and administration of the fund for truck safety

purposes; to set up and establish the Michigan truck safety

commission; to establish certain standards for road contracts for

certain businesses; to provide for the continuing review of

transportation needs within the state; to authorize the state

transportation commission, counties, cities, and villages to borrow

money, issue bonds, and make pledges of funds for transportation

purposes; to authorize counties to advance funds for the payment of

deficiencies necessary for the payment of bonds issued under this

act; to provide for the limitations, payment, retirement, and

security of the bonds and pledges; to provide for appropriations

and tax levies by counties and townships for county roads; to

authorize contributions by townships for county roads; to provide

for the establishment and administration of the state trunk line

fund, local bridge fund, comprehensive transportation fund, and

certain other funds; to provide for the deposits in the state trunk

line fund, critical bridge fund, comprehensive transportation fund,

and certain other funds of money raised by specific taxes and fees;

to provide for definitions of public transportation functions and

criteria; to define the purposes for which Michigan transportation

funds may be allocated; to provide for Michigan transportation fund

grants; to provide for review and approval of transportation

programs; to provide for submission of annual legislative requests

and reports; to provide for the establishment and functions of

certain advisory entities; to provide for conditions for grants; to

provide for the issuance of bonds and notes for transportation

purposes; to provide for the powers and duties of certain state and

local agencies and officials; to provide for the making of loans

for transportation purposes by the state transportation department

and for the receipt and repayment by local units and agencies of

those loans from certain specified sources; and to repeal acts and

parts of acts,"

by amending sections 11 and 11c (MCL 247.661 and 247.661c), section

11 as amended by 2002 PA 639 and section 11c as amended by 2002 PA

498.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 11. (1) A fund to be known as the state trunk line fund

is established and shall be set up and maintained in the state

treasury as a separate fund. The money deposited in the state trunk

line fund is appropriated to the state transportation department

for the following purposes in the following order of priority:

     (a) For the payment, but only from money restricted as to use

by section 9 of article IX of the state constitution of 1963, of

bonds, notes, or other obligations in the following order of

priority:

     (i) For the payment of contributions pledged before July 18,

1979 and required to be made by the state highway commission or the

state transportation commission under contracts entered into before

July 18, 1979, under 1941 PA 205, MCL 252.51 to 252.64, which

contributions have been pledged before July 18, 1979, for the

payment of the principal and interest on bonds issued under 1941 PA

205, MCL 252.51 to 252.64, for the payment of which a sufficient

sum is irrevocably appropriated.

     (ii) For the payment of the principal and interest upon bonds

designated "State of Michigan, State Highway Commissioner, Highway

Construction Bonds, Series I", dated September 1, 1956, in the

aggregate principal amount of $25,000,000.00, issued pursuant to

former 1955 PA 87 and the resolution of the state administrative

board adopted August 6, 1956, for the payment of which a sufficient

sum is irrevocably appropriated.

     (iii) For the payment of the principal and interest on bonds

issued under section 18b for transportation purposes other than

comprehensive transportation purposes as defined by law and the

payment of contributions of pledged to the payment of principal and

interest on bonds issued under section 18d and contracts entered

into under section 18d by the state highway commission or state

transportation commission to be made pursuant to contracts entered

into under section 18d. , which contributions are pledged to the

payment of principal and interest on bonds issued under the

authorization of section 18d and contracts executed pursuant to

that section. A sufficient portion of the fund is irrevocably

appropriated to pay, when due, the principal and interest on bonds

or notes issued under section 18b for purposes other than

comprehensive transportation purposes as defined by law, and to pay

the annual contributions of the state highway commission and the

state transportation commission as that are pledged for the payment

of bonds issued pursuant to contracts authorized by section 18d.

     (b) For the transfer of funds appropriated pursuant to section

10(1)(g) 10(1)(h) to the transportation economic development fund,

but the transfer shall be reduced each fiscal year by the amount of

debt service to be paid in that year from the state trunk line fund

for bonds, notes, or other obligations issued to fund projects of

the transportation economic development fund, which amount shall be

certified by the department.

     (c) For the transfer of funds appropriated pursuant to section

10(1)(a) to the railroad rail grade crossing account in the state

trunk line fund for expenditure for rail grade crossing improvement

purposes at rail grade crossings on public roads and streets under

the jurisdiction of the this state, counties, cities, or villages.

Projects shall be selected for funding in accordance with the

following:

     (i) Not more than 50% or less than 30% of these funds and

matched federal funds shall be expended for state trunk line

projects.

     (ii) In prioritizing projects for these funds, in whole or in

part, the department shall consider train and vehicular traffic

volumes, accident history, traffic control device improvement

needs, and the availability of funding.

     (iii) Consistent with the other requirements for these funds,

the first priority for funds deposited pursuant to this subdivision

for rail grade crossing improvements and retirement shall be to

match federal funds from the railroad-highway grade crossing

improvement program or other comparable federal programs if a match

is required under federal law.

     (iv) If the department and the road authority with jurisdiction

over the crossing formally agree that the grade crossing should be

eliminated by permanent closing of the public road or street, the

physical removal of the crossing, roadway within railroad rights of

way, and street termination treatment will be negotiated between

the road authority and railroad company. The funds provided to the

road authority as a result of the crossing closure will be credited

to its account representing the same road or street system on which

the crossing is located and shall be used for any transportation

purpose within that road authority's jurisdiction.

     (d) For the total operating expenses of the state trunk line

fund for each fiscal year as appropriated by the legislature.

     (e) For the preservation of state trunk line highways and

bridges.

     (f) For the opening, widening, improving, construction, and

reconstruction of state trunk line highways and bridges, including

the acquisition of necessary rights of way and the work incidental

to that opening, widening, improving, construction, or

reconstruction. Those sums in the state trunk line fund not

otherwise appropriated, distributed, determined, or set aside by

law shall be used for the construction or reconstruction of the

national system of interstate and defense highways, referred to in

this act as "the interstate highway system", to the extent

necessary to match federal aid funds as the federal aid funds

become available for that purpose; and, for the construction and

reconstruction of the state trunk line system.

     (g) The state transportation department may enter into

agreements with county road commissions and with cities and

villages a local road agency or a private sector company to perform

work on a highway, road, or street. The agreements may provide for

the performance by any of the contracting parties of any of the

work contemplated by the contract including maintenance,

engineering services, and the acquisition of rights of way in

connection with the work, by purchase or condemnation by any of the

contracting parties in its own name, and for joint participation in

the costs, but only to the extent that the contracting parties are

otherwise authorized by law to expend money on the highways, roads,

or streets. The state transportation department also may contract

with a county local road commission, city, and village agency to

advance money to a county local road commission, city, and village

agency to pay their the costs of improving railroad grade crossings

on the terms and conditions agreed to in the contract. A contract

may be executed before or after the state transportation commission

borrows money for the purpose of advancing money to a county local

road commission, city, or village, agency, but the contract shall

be executed before the advancement of any money to a county local

road commission, city, or village agency by the state

transportation commission, and shall provide for the full

reimbursement of any advancement by a county local road commission,

city, or village agency to the state transportation department,

with interest, within 15 years after advancement, from any

available revenue sources of the county local road commission,

city, or village agency or, if provided in the contract, by

deduction from the periodic disbursements of any money returned by

the this state to the county local road commission, city, or

village.agency.

     (h) For providing inventories of supplies and materials

required for the activities of the state transportation department.

The state transportation department may purchase supplies and

materials for these purposes, with payment to be made out of the

state trunk line fund to be charged on the basis of issues from

inventory in accordance with the accounting and purchasing laws of

this state.

     (2) Notwithstanding any other provision of this act, at least

90% of state revenue appropriated annually to the state trunk line

fund less the amounts described in subdivisions (a) to (i) shall be

expended annually by the state transportation department for the

preservation of highways, roads, streets, and bridges and for the

payment of debt service on bonds, notes, or other obligations

described in subsection (1)(a) issued after July 1, 1983 , for the

purpose of providing funds for the preservation of highways, roads,

streets, and bridges. Of the amounts appropriated for state trunk

line projects, the department shall, where possible, secure

warranties of not less than 5-year full replacement guarantee for

contracted construction work. If an appropriate certificate is

filed under section 18e, but only to the extent necessary, this

subsection shall does not prohibit the use of any amount of money

restricted as to use by section 9 of article IX of the state

constitution of 1963 and deposited in the state trunk line fund for

the payment of debt service on bonds, notes, or other obligations

pledging for the payment thereof of that debt service money

restricted as to use by section 9 of article IX of the state

constitution of 1963 and deposited in the state trunk line fund,

whenever issued, as specified under subsection (1)(a). The amounts

which that are deducted from the state trunk line fund for the

purpose of the calculation required by this subsection are as

follows:

     (a) Amounts expended for the purposes described in subsection

(1)(a) for the payment of debt service on bonds, notes, or other

obligations issued before July 2, 1983.

     (b) Amounts expended to provide the state matching requirement

for projects on the national highway system and for the payment of

debt service on bonds, notes, or other obligations issued after

July 1, 1983, for the purpose of providing funds for the state

matching requirements for projects on the national highway system.

     (c) Amounts expended for the construction of a highway,

street, road, or bridge to 1 or more of the following or for the

payment of debt service on bonds, notes, or other obligations

issued after July 1, 1983, for the purpose of providing funds for

the construction of a highway, street, road, or bridge to 1 or more

of the following:

     (i) A location for which a building permit has been obtained

for the construction of a manufacturing or industrial facility.

     (ii) A location for which a building permit has been obtained

for the renovation of, or addition to, a manufacturing or

industrial facility.

     (d) Amounts expended for capital outlay other than for

highways, roads, streets, and bridges or to pay debt service on

bonds, notes, or other obligations issued after July 1, 1983, for

the purpose of providing funds for capital outlay other than for

highways, roads, streets, and bridges.

     (e) Amounts expended for the operating expenses of the state

transportation department other than the units of the department

performing the functions assigned on January 1, 1983 to the bureau

of highways.

     (f) Amounts expended pursuant to contracts entered into before

January 1, 1983.

     (g) Amounts expended for the purposes described in subsection

(5).

     (h) Amounts appropriated for deposit in the transportation

economic development fund and the rail grade crossing account

pursuant to under section 10(1)(g) and 10(1)(a) and (h).

     (i) Upon the affirmative recommendation of the director of the

state transportation department and the approval by resolution of

the state transportation commission, those amounts expended for

projects vital to the economy of this state, a region, or local

area or the safety of the public. The resolution shall state the

cost of the project exempted from this subsection.

     (3) Notwithstanding any other provision of this act, the state

transportation department shall expend annually at least 90% of the

federal revenue distributed to the credit of the state trunk line

fund in that year, except for federal revenue expended for the

purposes described in subsection (2)(b), (c), (f), and (i) and for

the payment of notes issued under section 18b(9) on the

preservation of highways, roads, streets, and bridges. The

requirement of this subsection shall be is waived if compliance

would cause this state to be ineligible according to under federal

law for federal revenue, but only to the extent necessary to make

this state eligible according to under federal law for that

revenue.

     (4) Notwithstanding any other provision of this section, the

state transportation department may loan money to county a local

road commissions, cities, and villages agency for paying capital

costs of transportation purposes described in the second paragraph

of section 9 of article IX of the state constitution of 1963 from

the proceeds of bonds or notes issued pursuant to section 18b or

from the state trunk line fund. Loans made directly from the state

trunk line fund shall be made only after provision of funds for the

purposes specified in subsection (1)(a) to (f). Loans described in

this subsection are not subject to the revised municipal finance

act, 2001 PA 34, MCL 141.2101 to 141.2821.

     (5) County A local road commissions, cities, and villages

agency may borrow money from the proceeds of bonds or notes issued

under section 18b or the state trunk line fund for the purposes set

forth in subsection (4) that shall be repayable, with interest,

from 1 or more of the following:

     (a) The money to be received by the county local road

commission, city, or village agency from the Michigan

transportation fund, except to the extent the money has been or may

in the future be pledged by contract in accordance with under 1941

PA 205, MCL 252.51 to 252.64, or has been or may in the future be

pledged for the payment of the principal and interest upon notes

issued pursuant to under 1943 PA 143, MCL 141.251 to 141.254, or

has been or may in the future be pledged for the payment of

principal and interest upon bonds issued under section 18c or 18d,

or has been or may in the future be pledged for the payment of the

principal and interest upon bonds issued pursuant to 1952 PA 175,

MCL 247.701 to 247.707.

     (b) Any other legally available funds of the city, village, or

county local road commission, agency, other than the general funds

of the county.

     (6) Loans If required by the department, loans made pursuant

to under subsection (4) if required by the state transportation

department may be are payable by deduction by the state treasurer,

upon direction of the state transportation department, from the

periodic disbursements of any money returned by the this state

under this act to the county local road commission, city, or

village, agency, but only after sufficient money has been returned

to the county local road commission, city, or village agency to

provide for the payment of contractual obligations incurred or to

be incurred and principal and interest on notes and bonds issued or

to be issued under 1941 PA 205, MCL 252.51 to 252.64, 1943 PA 143,

MCL 141.251 to 141.254, 1952 PA 175, MCL 247.701 to 247.707, or

section 18c or 18d. The interest rates and payment schedules of any

loans made from the proceeds of bonds or notes issued pursuant to

section 18b shall be established by the state transportation

department to conform as closely as practicable to the interest

rate and repayment schedules on the bonds or notes issued to make

the loans. However, the state transportation department may allow

for the deferral of the first payment of interest or principal on

the loans for a period of not to exceed 1 year after the respective

first payment of interest or principal on the bonds or notes issued

to make the loans.

     (7) The amount borrowed by a county local road commission,

city, or village pursuant to agency under subsection (5) shall not

be included in, or charged against, any constitutional, statutory,

or charter debt limitation of the county, city, or village and

shall not be included in the determination of the maximum annual

principal and interest requirements of, or the limitations upon,

the maximum annual principal and interest incurred under 1941 PA

205, MCL 252.51 to 252.64, 1943 PA 143, MCL 141.251 to 141.254,

1952 PA 175, MCL 247.701 to 247.707, or section 18c or 18d.

     (8) The county local road commission, city, or village agency

is not required to seek or obtain the approval of the electors, the

municipal finance commission or its successor agency, or, except as

provided in this subsection, the department of treasury to borrow

money pursuant to under subsection (5). The borrowing is not

subject to the revised municipal finance act, 2001 PA 34, MCL

141.2101 to 141.2821, or to section 5(g) of the home rule city act,

1909 PA 279, MCL 117.5. The state transportation department shall

give at least 10 days' notice to the state treasurer of its

intention to make a loan under subsection (4). If the state

treasurer gives notice to the director of the state transportation

department within 10 days of after receiving the notice from the

state transportation department, that, based upon the then existing

financial or credit situation of the county local road commission,

city, or village, agency, it would not be in the best interests of

the this state to make a loan under subsection (4) to the county

local road commission, city, or village, agency, the loan shall not

be made unless the state treasurer, after a hearing, if requested

by the affected county local road commission, city, or village,

agency, subsequently gives notice to the director of the state

transportation department that the loan may be made on the

conditions that the state treasurer specifies.

     (9) The state transportation commission may borrow money and

issue bonds and notes under , and pursuant to the requirements of,

section 18b to make loans to county a local road commissions,

cities, and villages agency for the purposes described in the

second paragraph of section 9 of article IX of the state

constitution of 1963, as provided in subsection (4). A single issue

of bonds or notes may be issued for the purposes specified in

subsection (4) and for the other purposes specified in section 18b.

The house and senate transportation appropriations subcommittees

shall be notified by the department if there are extras and

overruns sufficient to require approval of either the state

administrative board or the commission, or both, on any contract

between the department and a local road agency or a private

business.

     (10) The director of the state transportation department,

after consultation with representatives of the interests of county

local road commissions, cities, and villages, agency, shall

establish, by intergovernmental communication, procedures for the

implementation and administration of the loan program established

under subsections (4) to (9).

     (11) Not more than 10% per year of all of the funds received

by and returned to the state transportation department from any

source for the purposes of this section may be expended for

administrative expenses. The department shall be subject to section

14(5) if more than 10% per year is expended for administrative

expenses. As used in this subsection, "administrative expenses"

means those expenses that are not assigned including, but not

limited to, specific road construction or preservation projects,

and are often referred to as general or supportive services.

Administrative expenses shall do not include net equipment expense,

net capital outlay, debt service principal and interest, and

payments to other state or local offices which that are assigned,

but not limited to, specific road construction projects or

preservation activities.

     (12) Any performance audits of the department shall be

conducted according to government auditing standards issued by the

United States general accounting office.

     (13) Contracts entered into to advance money to a county local

road commission, city, or village agency under subsection (1)(g)

are not subject to the revised municipal finance act, 2001 PA 34,

MCL 141.2101 to 141.2821.

     (14) As used in this section: , "rail grade crossing

improvement purposes"

     (a) "Local road agency" means that term as defined in section

9a.

     (b) "Rail grade crossing improvement purposes" means 1 or more

House Bill No. 5167 (H-2) as amended May 8, 2014

of the following:

(i) (a) The installation and modernization of active and

passive warning devices at railroad grade crossings.

(ii) (b) The installation or improvement of grade crossing

surfaces.

(iii) (c) Modification, relocation, or modernization of railroad

grade crossing active and passive warning devices necessitated by

roadway improvement projects.

(iv) (d) Test installations of innovative warning devices or

other innovative applications.

(v) (e) Construction of new grade separations.

(vi) (f) A cash incentive payment made pursuant to subsection

(1)(c)(iv) for any public road or street crossing, in an amount no

greater than the cost of installing flashing light signals and half

roadway gates at the crossing.

(vii) (g) Any other work that would be eligible for funding

under the federal railroad-highway grade crossing improvement

program or other comparable programs.

     Sec. 11c. (1) All federal aid construction projects , all

other projects of the department or a local road agency concerning

highways, streets, roads, and bridges, whose cost exceeds

$100,000.00 for construction or preservation as defined in section

10c, shall be performed by contract awarded by competitive bidding

unless the department shall affirmatively find or the local road

agency affirmatively finds that under the circumstances relating to

those projects, some other method is in the public interest. All of

those The director of the department [ ] shall

House Bill No. 5167 (H-2) as amended May 8, 2014

report [HIS OR HER] findings shall be reported [

] to the state

transportation commission 90 days before [work is commenced and

promptly

] in writing to the

appropriations committees of the senate and house of

representatives[. A county road commission shall report its findings

before work is commenced in writing to the county board of commissioners

of that county. A city or village shall report its findings before work is commenced in writing to the governing elected body of that city or village.] However, in

a case in which the department or a local road agency determines

emergency action is required, the reports need not be filed before

work is commenced a contract is awarded but shall be promptly

filed. Local road agencies that make a decision not to perform

construction or preservation projects exceeding $100,000.00 shall

contract for this work through competitive bidding.

     (2) The department shall develop and implement a performance-

based maintenance system to improve efficiencies and outcomes in

the performance of maintenance services on state trunk line

highways.

     (3) No later than September 30, 2015, the department shall

develop and implement a performance rating system for the

maintenance services performed on all highways, streets, and roads

under its jurisdiction. The performance rating system shall provide

for the collection of data on all maintenance activities, including

the quantities and locations of activities performed and the costs

associated with those activities.

     (4) No later than September 30, 2015, a minimum of 20% of all

new or renewed contracts entered into by the department for

maintenance services shall provide for payment based on performance

outputs or outcomes associated with the performance rating system

required under subsection (3).

     (5) The director of the department shall report results and

findings on the outcomes of state trunk line highway maintenance

services, the contracting process, and contract performance for all

contracts entered into under this section no later than December 1,

2016, and on December 1 of each subsequent year to the

appropriations committees of the senate and house of

representatives.

     (6) A local road agency that received at least $20,000,000.00

in funding from the Michigan transportation fund in calendar year

2013 shall develop and implement a performance-based maintenance

system to improve efficiencies and outcomes in the performance of

maintenance services on all highways, streets, and roads under its

jurisdiction.

     (7) No later than March 31, 2016, a local road agency

described in subsection (6) shall develop and implement a

performance rating system for the maintenance services performed on

all highways, streets, and roads under its jurisdiction. The

performance rating system shall provide for the collection of data

on all maintenance activities, including the quantities and

locations of activities performed and the costs associated with

those activities.

     (8) No later than September 30, 2015, a minimum of 20% of all

new or renewed contracts entered into by a local road agency

described in subsection (6) for maintenance services shall provide

for payment based on performance outputs or outcomes associated

with the performance rating system required under subsection (7).

     (9) The chief executive of each local road agency required to

competitively bid under this section shall report results and

findings on the outcomes of maintenance services performed on all

highways, streets, and roads under the jurisdiction of that local

road agency, the contracting process, and contract performance for

all contracts entered into under this section no later than

December 1, 2016, and on December 1 of each subsequent year to the

director of the department and to the appropriations committees of

the senate and house of representatives.

     (10) As used in this section:

     (a) "Local road agency" means that term as defined in section

9a.

     (b) "Maintenance services" means routine and reactive

maintenance activities undertaken to ensure the normal and safe

operation of a highway, street, or road, including activities

performed on an appurtenance or roadside feature associated with a

highway, street, or road that is necessary for the safe operation

of the appurtenance or roadside feature. Maintenance services do

not include a construction activity that is intended to

significantly repair, resurface, rehabilitate, or reconstruct a

highway, street, or road, or an appurtenance or roadside feature

associated with a highway, street, or road.