HOUSE BILL No. 5337

December 12, 2017, Introduced by Reps. Yaroch and Howrylak and referred to the Committee on Local Government.

     A bill to amend 2012 PA 436, entitled

"Local financial stability and choice act,"

by amending the title and sections 2, 3, 7, 7a, 8, 9, 10, 11, 12,

13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 24, 27, and 28 (MCL

141.1542, 141.1543, 141.1547, 141.1547a, 141.1548, 141.1549,

141.1550, 141.1551, 141.1552, 141.1553, 141.1554, 141.1555,

141.1556, 141.1557, 141.1558, 141.1559, 141.1560, 141.1561,

141.1562, 141.1564, 141.1567, and 141.1568), section 2 as amended

by 2015 PA 110 and section 7a as added by 2015 PA 113, and by

adding section 9a.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

     An act to safeguard and assure the financial accountability of

local units of government and school districts; to preserve the

capacity of local units of government and school districts to

provide or cause to be provided necessary services essential to the

public health, safety, and welfare; to provide for review,

management, planning, and control of the financial operation of

local units of government and school districts and the provision of

services by local units of government and school districts; to

provide criteria to be used in determining the financial condition

of local units of government and school districts; to authorize a

declaration of the existence of a financial emergency within a

local unit of government or school district; to prescribe remedial

measures to address a financial emergency within a local unit of

government or school district; to provide for a review and appeal

process; to provide for the appointment and to prescribe the powers

and duties of an emergency manager for a local unit of government

or school district; to provide for the appointment and to prescribe

the powers and duties of a financial management team for a local

unit of government or school district; to provide for the

modification or termination of contracts under certain

circumstances; to provide for the termination of a financial

emergency within a local unit of government or school district; to

provide a process by which a local unit of government or school

district may file for bankruptcy; to prescribe the powers and

duties of certain state agencies and officials and officials within

local units of government and school districts; to provide for

appropriations; and to repeal acts and parts of acts.

     Sec. 2. As used in this act:

     (a) "Chapter 9" means chapter 9 of title 11 of the United

States Code, 11 USC 901 to 946.

     (b) "Chief administrative officer" means any of the following:

     (i) The manager of a village or, if a village does not employ

a manager, the president of the village.

     (ii) The city manager of a city or, if a city does not employ

a city manager, the mayor of the city.

     (iii) The manager of a township or the manager or

superintendent of a charter township or, if the township does not

employ a manager or superintendent, the supervisor of the township.

     (iv) The elected county executive or appointed county manager

of a county or, if the county has not adopted the provisions of

either 1973 PA 139, MCL 45.551 to 45.573, or 1966 PA 293, MCL

45.501 to 45.521, the county's chairperson of the county board of

commissioners.

     (v) The chief operating officer of an authority or of a public

utility owned by a city, village, township, or county.

     (vi) The superintendent of a school district.

     (c) "Creditor" means either of the following:

     (i) An entity that has a noncontingent claim against a local

government that arose at the time of or before the commencement of

the neutral evaluation process and whose claim represents at least

$5,000,000.00 or comprises more than 5% of the local government's

debt or obligations, whichever is less.

     (ii) An entity that would have a noncontingent claim against

the local government upon the rejection of an executory contract or

unexpired lease in a chapter 9 case and whose claim would represent

at least $5,000,000.00 or would comprise more than 5% of the local

government's debt or obligations, whichever is less.

     (d) "Debtor" means a local government that is authorized to

proceed under chapter 9 by this act and that meets the requirements

of chapter 9.

     (e) "Emergency manager" means an emergency manager appointed

under section 9. An emergency manager includes an emergency

financial manager appointed under former 1988 PA 101 or former 1990

PA 72 who was acting in that capacity on March 28, 2013.

     (f) "Entity" means a partnership, nonprofit or business

corporation, limited liability company, labor organization, or any

other association, corporation, trust, or other legal entity.

     (g) "Financial and operating plan" means a written financial

and operating plan for a local government under section 11,

including an educational plan for a school district.

     (h) "Financial management team" means a financial management

team appointed under section 9a.

(i) (h) "Good faith" means participation by an interested

party or a local government representative in the neutral

evaluation process with the intent to negotiate a resolution of the

issues that are the subject of the neutral evaluation process,

including the timely provision of complete and accurate information

to provide the relevant participants through the neutral evaluation

process with sufficient information, in a confidential manner, to

negotiate the readjustment of the local government's debt.

(j) (i) "Interested party" means a trustee, a committee of

creditors, an affected creditor, an indenture trustee, a pension

fund, a bondholder, a union that under its collective bargaining

agreements has standing to initiate contract negotiations with the

local government, or a representative selected by an association of

retired employees of the public entity who receive income or

benefits from the public entity. A local government may invite

holders of contingent claims to participate as interested parties

in the neutral evaluation process if the local government

determines that the contingency is likely to occur and the claim

may represent at least $5,000,000.00 or comprise more than 5% of

the local government's debt or obligations, whichever is less.

(k) (j) "Local emergency financial assistance loan board"

means the local emergency financial assistance loan board created

under section 2 of the emergency municipal loan act, 1980 PA 243,

MCL 141.932.

(l) (k) "Local government" means a municipal government or a

school district.

(m) (l) "Local government representative" means the person or

persons designated by the governing body of the local government

with authority to make recommendations and to attend the neutral

evaluation process on behalf of the governing body of the local

government.

(n) (m) "Local inspector" means a certified forensic

accountant, certified public accountant, attorney, or similarly

credentialed person whose responsibility it is to determine the

existence of proper internal and management controls, fraud,

criminal activity, or any other accounting or management

deficiencies.

(o) (n) "Municipal government" means a city, a village, a

township, a charter township, a county, a department of county

government if the county has an elected county executive under 1966

PA 293, MCL 45.501 to 45.521, an authority established by law, or a

public utility owned by a city, village, township, or county.

(p) (o) "Neutral evaluation process" means a form of

alternative dispute resolution or mediation between a local

government and interested parties as provided for in section 25.

(q) (p) "Neutral evaluator" means an impartial, unbiased

person or entity, commonly known as a mediator, who assists local

governments and interested parties in reaching their own settlement

of issues under this act, who is not aligned with any party, and

who has no authoritative decision-making power.

(r) (q) "Receivership" means the process under this act by

which a financial emergency is addressed through the appointment of

an emergency manager or a financial management team. Receivership

does not include chapter 9 or any provision under federal

bankruptcy law.

(s) (r) "Review team" means a review team appointed under

section 4.

(t) (s) "School board" means the governing body of a school

district.

(u) (t) "School district" means a school district as that term

is defined in section 6 of the revised school code, 1976 PA 451,

MCL 380.6, or an intermediate school district as that term is

defined in section 4 of the revised school code, 1976 PA 451, MCL

380.4.

(v) (u) "State financial authority" means the following:

     (i) For a municipal government, the state treasurer.

     (ii) Except as otherwise provided in subparagraph (iii), for a

school district, the superintendent of public instruction.

     (iii) For a school district subject to a deficit elimination

plan under section 1220 of the revised school code, 1976 PA 451,

MCL 380.1220, the state treasurer.

(w) (v) "Strong mayor" means a mayor who has been granted veto

power for any purpose under the charter of that local government.

(x) (w) "Strong mayor approval" means approval of a resolution

under 1 of the following conditions:

     (i) The strong mayor approves the resolution.

     (ii) The resolution is approved by the governing body with

sufficient votes to override a veto by the strong mayor.

     (iii) The strong mayor vetoes the resolution and the governing

body overrides the veto.

     Sec. 3. The legislature finds and declares all of the

following:

     (a) That the health, safety, and welfare of the citizens of

this state would be materially and adversely affected by the

insolvency of local governments and that the fiscal accountability

of local governments is vitally necessary to the interests of the

citizens of this state to assure the provision of necessary

governmental services essential to public health, safety, and

welfare.

     (b) That it is vitally necessary to protect the credit of this

state and its political subdivisions and that it is necessary for

the public good and it is a valid public purpose for this state to

take action and to assist a local government in a financial

emergency so as to remedy the financial emergency by requiring

prudent fiscal management and efficient provision of services,

permitting the restructuring of contractual obligations, and

prescribing the powers and duties of state and local government

officials, and emergency managers, and financial management teams.

     (c) That the fiscal stability of local governments is

necessary to the health, safety, and welfare of the citizens of

this state and it is a valid public purpose for this state to

assist a local government in a condition of financial emergency by

providing for procedures of alternative dispute resolution between

a local government and its creditors to resolve disputes, to

determine criteria for establishing the existence of a financial

emergency, and to set forth the conditions for a local government

to exercise powers under federal bankruptcy law.

     (d) That the authority and powers conferred by this act

constitute a necessary program and serve a valid public purpose.

     Sec. 7. (1) Notwithstanding section 6(3), upon the

confirmation of a finding of a financial emergency under section 6,

the governing body of the local government shall, by resolution

within 7 days after the confirmation of a finding of a financial

emergency, select 1 of the following local government options to

address the financial emergency:

     (a) The consent agreement option pursuant to section 8.

     (b) The Before the effective date of the amendatory act that

added section 9a, the emergency manager option pursuant to section

9.

     (c) Beginning on the effective date of the amendatory act that

added section 9a, the financial management team option pursuant to

section 9a.

(d) (c) The neutral evaluation process option pursuant to

section 25.

(e) (d) The chapter 9 bankruptcy option pursuant to section

26.

     (2) Subject to subsection (3), if the local government has a

strong mayor, the resolution under subsection (1) requires strong

mayor approval. If the local government is a school district, the

resolution shall must be approved by the school board. The

resolution shall must be filed with the state treasurer, with a

copy to the superintendent of public instruction if the local

government is a school district.

     (3) If the governing body of the local government does not

pass a resolution as required under subsection (1), the local

government shall proceed under the neutral evaluation process

pursuant to section 25.

     (4) Subject to section sections 9(6)(c) and (11) and 9a(15)

and (17), unless authorized by the governor, a local government

shall not utilize 1 of the local options listed in subsection

(1)(a) to (d) (e) more than 1 time.

     Sec. 7a. Notwithstanding section 7, if a school district is

subject to an enhanced deficit elimination plan under section 1220

of the revised school code, 1976 PA 451, MCL 380.1220, and the

state treasurer determines that the school district has failed to

submit or comply with the requirements of the enhanced deficit

elimination plan, the state treasurer may declare that a financial

emergency exists within the school district and before the

effective date of the amendatory act that added section 9a

recommend that the governor appoint an emergency manager to address

the financial emergency within the school district under section 9

or beginning on the effective date of the amendatory act that added

section 9a recommend that the governor appoint a financial

management team to address the financial emergency within the

school district under section 9a.

     Sec. 8. (1) The chief administrative officer of a local

government may negotiate and sign a consent agreement with the

state treasurer as provided for in this act. If the local

government is a school district and the consent agreement contains

an educational plan, the consent agreement shall must also be

signed by the superintendent of public instruction. The consent

agreement shall must provide for remedial measures considered

necessary to address the financial emergency within the local

government and provide for the financial stability of the local

government. The consent agreement may utilize state financial

management and technical assistance as necessary in order to

alleviate the financial emergency. The consent agreement shall must

also provide for periodic financial status reports to the state

treasurer, with a copy of each report to each state senator and

state representative who represents that local government. The

consent agreement may provide for a board appointed by the governor

to monitor the local government's compliance with the consent

agreement. In order for the consent agreement to go into effect, it

shall must be approved, by resolution, by the governing body of the

local government and shall must be approved and executed by the

state treasurer. Nothing in the consent agreement shall must limit

the ability of the state treasurer in his or her sole discretion to

declare a material breach of the consent agreement. A consent

agreement shall must provide that in the event of a material

uncured breach of the consent agreement, the governor may place the

local government in receivership or in the neutral evaluation

process. If within 30 days after a local government selects the

consent agreement option under section 7(1)(a) or sooner in the

discretion of the state treasurer, a consent agreement cannot be

agreed upon, the state treasurer shall require the local government

to proceed under 1 of the other local options provided for in

section 7.

     (2) A consent agreement as provided in subsection (1) may

require a continuing operations plan or a recovery plan if required

by the state treasurer.

     (3) If the state treasurer requires that a consent agreement

include a continuing operations plan, the local government shall

prepare and file the continuing operations plan with the state

treasurer as provided for in the consent agreement. The state

treasurer shall approve or reject the initial continuing operations

plan within 14 days of receiving it from the local government. If a

continuing operations plan is rejected, the local government shall

refile an amended plan within 30 days of the rejection, addressing

any concerns raised by the state treasurer or the superintendent of

public instruction regarding an educational plan. If the amended

plan is rejected, then the local government may be considered to be

in material breach of the consent agreement. The local government

shall file annual updates to its continuing operations plan. The

annual updates shall must be included with the annual filing of the

local government's audit report with the state financial authority

as long as the continuing operations plan remains in effect.

     (4) The continuing operations plan shall must be in a form

prescribed by the state treasurer but shall, must, at a minimum,

include all of the following:

     (a) A detailed projected budget of revenues and expenditures

over not less than 3 fiscal years which that demonstrates that the

local government's expenditures will not exceed its revenues and

that any existing deficits will be eliminated during the projected

budget period.

     (b) A cash flow projection for the budget period.

     (c) An operating plan for the budget period that assures

fiscal accountability for the local government.

     (d) A plan showing reasonable and necessary maintenance and

capital expenditures so as to assure the local government's fiscal

accountability.

     (e) An evaluation of the costs associated with pension and

postemployment health care obligations for which the local

government is responsible and a plan for how those costs will be

addressed within the budget period.

     (f) A provision for submitting quarterly compliance reports to

the state treasurer demonstrating compliance with the continuing

operations plan, with a copy of each report to each state senator

and state representative who represents that local government. Each

quarterly compliance report shall must be posted on the local

government's website within 7 days after the report is submitted to

the state treasurer.

     (5) If a continuing operations plan is approved for a

municipal government, the municipal government shall amend the

budget and general appropriations ordinance adopted by the

municipal government under the uniform budgeting and accounting

act, 1968 PA 2, MCL 141.421 to 141.440a, to the extent necessary or

advisable to give full effect to the continuing operations plan. If

a continuing operations plan is approved for a school district, the

school district shall amend the budget adopted by the school

district under the uniform budgeting and accounting act, 1968 PA 2,

MCL 141.421 to 141.440a, to the extent necessary or advisable to

give full effect to the continuing operations plan. The chief

administrative officer, the chief financial officer, the governing

body, and other officials of the local government shall take and

direct such actions as may be necessary or advisable to maintain

the local government's operations in compliance with the continuing

operations plan.

     (6) If the state treasurer requires that a consent agreement

include a recovery plan, the state treasurer, with input from the

local government, shall develop and adopt a recovery plan. If a

recovery plan is developed and adopted for the local government,

the local government shall file annual updates to its recovery

plan. The annual updates shall must be included with the annual

filing of the local government's audit report with the state

financial authority as long as the recovery plan remains in effect.

     (7) A recovery plan may include terms and provisions as may be

approved in the discretion of the state treasurer, including, but

not limited to, 1 or more of the following:

     (a) A detailed projected budget of revenues and expenditures

over not less than 3 fiscal years that demonstrates that the local

government's expenditures will not exceed its revenues and that any

existing deficits will be eliminated during the projected budget

period.

     (b) A cash flow projection for the budget period.

     (c) An operating plan for the budget period that assures

fiscal accountability for the local government.

     (d) A plan showing reasonable and necessary maintenance and

capital expenditures so as to assure the local government's fiscal

accountability.

     (e) An evaluation of costs associated with pension and

postemployment health care obligations for which the local

government is responsible and a plan for how those costs will be

addressed to assure that current obligations are met and that steps

are taken to reduce future unfunded obligations.

     (f) Procedures for cash control and cash management,

including, but not limited to, procedures for timely collection,

securing, depositing, balancing, and expending of cash. Procedures

for cash control and cash management may include the designation of

appropriate fiduciaries.

     (g) A provision for submitting quarterly compliance reports to

the state treasurer and the chief administrative officer of the

local government that demonstrate compliance with the recovery

plan, with a copy of each report to each state senator and state

representative who represents that local government. Each quarterly

compliance report shall must be posted on the local government's

website within 7 days after the report is submitted to the state

treasurer.

     (8) The recovery plan may include the appointment of a local

auditor or local inspector, or both, in accordance with section

12(1)(p).

     (9) If a recovery plan is developed and adopted by the state

treasurer for a local government, the recovery plan shall supersede

supersedes the budget and general appropriations ordinance adopted

by the local government under the uniform budgeting and accounting

act, 1968 PA 2, MCL 141.421 to 141.440a, and the budget and general

appropriations ordinance is considered amended to the extent

necessary or advisable to give full effect to the recovery plan. In

the event of any inconsistency between the recovery plan and the

budget or general appropriations ordinance, the recovery plan shall

control. controls. The chief administrative officer, the chief

financial officer, the governing body, and other officers of the

local government shall take and direct actions as may be necessary

or advisable to bring and maintain the local government's

operations in compliance with the recovery plan.

     (10) Except as otherwise provided in this subsection, the

consent agreement may include a grant to the chief administrative

officer, the chief financial officer, the governing body, or other

officers of the local government by the state treasurer of 1 or

more of the powers prescribed for emergency managers or financial

management teams as otherwise provided in this act for such periods

and upon such terms and conditions as the state treasurer considers

necessary or convenient, in the state treasurer's discretion to

enable the local government to achieve the goals and objectives of

the consent agreement. However, the consent agreement shall must

not include a grant to the chief administrative officer, the chief

financial officer, the governing body, or other officers of the

local government of the powers prescribed for emergency managers or

financial management teams in section 12(1)(k).

     (11) Unless the state treasurer determines otherwise,

beginning 30 days after the date a local government enters into a

consent agreement under this act, that local government is not

subject to section 15(1) of 1947 PA 336, MCL 423.215, for the

remaining term of the consent agreement.

     (12) The consent agreement may provide for the required

retention by the local government of a consultant for the purpose

of assisting the local government to achieve the goals and

objectives of the consent agreement.

     (13) A local government is released from the requirements

under this section upon compliance with the consent agreement as

determined by the state treasurer.

     Sec. 9. (1) The Before the effective date of the amendatory

act that added section 9a, the governor may appoint an emergency

manager to address a financial emergency within that local

government as provided for in this act.

     (2) Upon appointment, an emergency manager shall act acts for

and in the place and stead of the governing body and the office of

chief administrative officer of the local government. The emergency

manager shall have has broad powers in receivership to rectify the

financial emergency and to assure the fiscal accountability of the

local government and the local government's capacity to provide or

cause to be provided necessary governmental services essential to

the public health, safety, and welfare. Following appointment of an

emergency manager and during the pendency of receivership, the

governing body and the chief administrative officer of the local

government shall not exercise any of the powers of those offices

except as may be specifically authorized in writing by the

emergency manager or as otherwise provided by this act and are

subject to any conditions required by the emergency manager.

     (3) All of the following apply to an emergency manager:

     (a) The emergency manager shall must have a minimum of 5

years' experience and demonstrable expertise in business,

financial, or local or state budgetary matters.

     (b) The emergency manager may, but need not, be a resident of

the local government.

     (c) The emergency manager shall must be an individual.

     (d) Except as otherwise provided in this subdivision, the

emergency manager shall serve serves at the pleasure of the

governor. An emergency manager is subject to impeachment and

conviction by the legislature as if he or she were a civil officer

under section 7 of article XI of the state constitution of 1963. A

Before the effective date of the amendatory act that added section

9a, a vacancy in the office of emergency manager shall must be

filled in the same manner as the original appointment. Beginning on

the effective date of the amendatory act that added section 9a, if

a vacancy occurs in the office of emergency manager, the governor

shall appoint a financial management team for that local government

as provided in section 9a.

     (e) The emergency manager's compensation shall must be paid by

this state and shall must be set forth in a contract approved by

the state treasurer. The contract shall must be posted on the

department of treasury's website within 7 days after the contract

is approved by the state treasurer.

     (f) In addition to the salary provided to an emergency manager

in a contract approved by the state treasurer under subdivision

(e), this state may receive and distribute private funds to an

emergency manager. As used in this subdivision, "private funds"

means any money the state receives for the purpose of allocating

additional salary to an emergency manager. Private funds

distributed under this subdivision are subject to section 1 of 1901

PA 145, MCL 21.161, and section 17 of article IX of the state

constitution of 1963.

     (4) In addition to staff otherwise authorized by law, an

emergency manager shall appoint additional staff and secure

professional assistance as the emergency manager considers

necessary to fulfill his or her appointment.

     (5) The emergency manager shall submit quarterly reports to

the state treasurer with respect to the financial condition of the

local government in receivership, with a copy to the superintendent

of public instruction if the local government is a school district

and a copy to each state senator and state representative who

represents that local government. In addition, each quarterly

report shall must be posted on the local government's website

within 7 days after the report is submitted to the state treasurer.

     (6) The emergency manager shall continue in the capacity of an

emergency manager as follows:

     (a) Until removed by the governor or the legislature as

provided in subsection (3)(d). If Before the effective date of the

amendatory act that added section 9a, if an emergency manager is

removed, the governor shall within 30 days of the removal appoint a

new emergency manager. Beginning on the effective date of the

amendatory act that added section 9a, if an emergency manager is

removed, the governor shall within 30 days of the removal appoint a

financial management team for that local government as provided in

section 9a.

     (b) Until the financial emergency is rectified.

     (c) If the emergency manager has served for at least 18 months

after his or her appointment under this act, the emergency manager

may, by resolution, be removed by a 2/3 vote of the governing body

of the local government. If the local government has a strong

mayor, the resolution requires strong mayor approval before the

emergency manager may be removed. Notwithstanding section 7(4), if

the emergency manager is removed under this subsection and the

local government has not previously breached a consent agreement

under this act, the local government may within 10 days negotiate a

consent agreement with the state treasurer. If a consent agreement

is not agreed upon within 10 days, the local government shall

proceed with the neutral evaluation process pursuant to section 25.

     (7) A local government shall be removed from receivership when

the financial conditions are corrected in a sustainable fashion as

provided in this act. In addition, the local government may be

removed from receivership if an emergency manager is removed under

subsection (6)(c) and the governing body of the local government by

2/3 vote approves a resolution for the local government to be

removed from receivership. If the local government has a strong

mayor, the resolution requires strong mayor approval before the

local government is removed from receivership. A local government

that is removed from receivership while a financial emergency

continues to exist as determined by the governor shall proceed

under the neutral evaluation process pursuant to section 25.

     (8) The governor may delegate his or her duties under this

section to the state treasurer.

     (9) Notwithstanding section 3(1) of 1968 PA 317, MCL 15.323,

an emergency manager is subject to all of the following:

     (a) 1968 PA 317, MCL 15.321 to 15.330, as a public servant.

     (b) 1973 PA 196, MCL 15.341 to 15.348, as a public officer.

     (c) 1968 PA 318, MCL 15.301 to 15.310, as if he or she were a

state officer.

     (10) An emergency financial manager appointed under former

1988 PA 101 or former 1990 PA 72, and serving immediately prior to

the effective date of this act, before March 28, 2013, shall be

considered an emergency manager under this act and shall continue

under this act to fulfill his or her powers and duties.

Notwithstanding any other provision of this act, the governor may

appoint a person who was appointed as an emergency manager under

former 2011 PA 4 or an emergency financial manager under former

1988 PA 101 or former 1990 PA 72 to serve as an emergency manager

under this act.

     (11) Notwithstanding section 7(4) and subject to the

requirements of this section, if an emergency manager has served

for less than 18 months after his or her appointment under this

act, the governing body of the local government may pass a

resolution petitioning the governor to remove the emergency manager

as provided in this section and allow the local government to

proceed under the neutral evaluation process as provided in section

25. If the local government has a strong mayor, the resolution

requires strong mayor approval. If the governor accepts the

resolution, notwithstanding section 7(4), the local government

shall proceed under the neutral evaluation process as provided in

section 25.

     Sec. 9a. (1) Beginning on the effective date of the amendatory

act that added this section, the governor may appoint a financial

management team to address a financial emergency within that local

government as provided for in this act.

     (2) Upon appointment, a financial management team acts for and

in the place and stead of the governing body and the office of

chief administrative officer of the local government. The financial

management team has broad powers in receivership to rectify the

financial emergency and to assure the fiscal accountability of the

local government and the local government's capacity to provide or

cause to be provided necessary governmental services essential to

the public health, safety, and welfare. Following appointment of a

financial management team and during the pendency of receivership,

the governing body and the chief administrative officer of the

local government shall not exercise any of the powers of those

offices except as may be specifically authorized in writing by the

financial management team or as otherwise provided by this act and

are subject to the conditions required by the financial management

team.

     (3) The governor shall appoint, with the advice and consent of

the senate, the following 3 members to a financial management team:

     (a) An individual who has a minimum of 5 years' experience and

demonstrable expertise in financial matters.

     (b) An individual who has a minimum of 3 years' experience

working in local units of government.

     (c) An individual appointed from a list of not fewer than 3

names recommended by the governing body of the local government to

act as local ombudsman. The individual appointed under this

subdivision must be a resident of the local government.

     (4) Notwithstanding section 3(1) of 1968 PA 317, MCL 15.323,

each member of a financial management team is subject to all of the

following:

     (a) 1968 PA 317, MCL 15.321 to 15.330, as a public servant.

     (b) 1973 PA 196, MCL 15.341 to 15.348, as a public officer.

     (c) 1968 PA 318, MCL 15.301 to 15.310, as if he or she were a

state officer.

     (5) The governor may remove a member of a financial management

team for incompetence, dereliction of duty, malfeasance,

misfeasance, or nonfeasance in office, or any other good cause. If

a member of a financial management team is removed, the governor

shall within 14 days of the removal appoint a new member to the

financial management team.

     (6) Each member of a financial management team is subject to

impeachment and conviction by the legislature as if he or she were

a civil officer under section 7 of article XI of the state

constitution of 1963.

     (7) If a vacancy occurs on a financial management team, the

governor shall within 14 days after the vacancy make an appointment

in the same manner as the original appointment.

     (8) The first meeting of a financial management team must be

called by the governor and must occur no later than 14 days after

the last member of the financial management team is appointed by

the governor. At the first meeting of a financial management team,

the members shall elect a chairperson from among its members. After

the first meeting, the financial management team shall meet

quarterly, or more frequently at the call of the chairperson or if

requested by 2 members of the financial management team.

     (9) Decisions by a financial management team for the local

government must be made by a majority of the members of the

financial management team.

     (10) The business that a financial management team may perform

must be conducted at a public meeting of the financial management

team held in compliance with the open meetings act, 1976 PA 267,

MCL 15.261 to 15.275.

     (11) A writing prepared, owned, used, in the possession of, or

retained by a financial management team in the performance of an

official function is subject to the freedom of information act,

1976 PA 442, MCL 15.231 to 15.246.

     (12) Each member of a financial management team must be paid

by this state and the compensation must be set forth in a contract

approved by the state treasurer. Each contract must be posted on

the department of treasury's website within 7 days after the

contract is approved by the state treasurer.

     (13) In addition to staff otherwise authorized by law, a

financial management team shall appoint additional staff and secure

professional assistance as the financial management team considers

necessary to fulfill its appointment.

     (14) A financial management team shall submit quarterly

reports to the state treasurer with respect to the financial

condition of the local government in receivership, with a copy to

the superintendent of public instruction if the local government is

a school district and a copy to each state senator and state

representative who represents that local government. In addition,

each quarterly report must be posted on the local government's

website within 7 days after the report is submitted to the state

treasurer.

     (15) A financial management team continues in the capacity of

a financial management team as follows:

     (a) Until removed by the governor. If a financial management

team is removed, the governor shall within 30 days of the removal

appoint a new financial management team.

     (b) Until the financial emergency is rectified.

     (c) If a financial management team has served the local

government for at least 18 months, a financial management team may,

by resolution, be removed by a 2/3 vote of the governing body of

the local government. If the local government has a strong mayor,

the resolution requires strong mayor approval before the financial

management team may be removed. Notwithstanding section 7(4), if a

financial management team is removed under this subsection and the

local government has not previously breached a consent agreement

under this act, the local government may within 10 days negotiate a

consent agreement with the state treasurer. If a consent agreement

is not agreed upon within 10 days, the local government shall

proceed with the neutral evaluation process pursuant to section 25.

     (16) A local government must be removed from receivership when

the financial conditions are corrected in sustainable fashion as

provided in this act. In addition, the local government may be

removed from receivership if a financial management team is removed

under subsection (15)(c) and the governing body of the local

government by a 2/3 vote approves a resolution for the local

government to be removed from receivership. If the local government

has a strong mayor, the resolution requires strong mayor approval

before the local government is removed from receivership. A local

government that is removed from receivership while a financial

emergency continues to exist as determined by the governor shall

proceed under the neutral evaluation process pursuant to section

25.

     (17) Notwithstanding section 7(4) and subject to the

requirements of this section, if a financial management team has

served for less than 18 months, the governing body of the local

government may pass a resolution petitioning the governor to remove

the financial management team as provided in this section and allow

the local government to proceed under the neutral evaluation

process as provided in section 25. If the local government has a

strong mayor, the resolution requires strong mayor approval. If the

governor accepts the resolution, notwithstanding section 7(4), the

local government shall proceed under the neutral evaluation process

as provided in section 25.

     (18) The governor may delegate his or her duties under this

section to the state treasurer.

     Sec. 10. (1) An emergency manager or a financial management

team shall issue to the appropriate local elected and appointed

officials and employees, agents, and contractors of the local

government the orders the emergency manager or financial management

team considers necessary to accomplish the purposes of this act,

including, but not limited to, orders for the timely and

satisfactory implementation of a financial and operating plan,

including an educational plan for a school district, or to take

actions, or refrain from taking actions, to enable the orderly

accomplishment of the financial and operating plan. An order issued

under this section is binding on the local elected and appointed

officials and employees, agents, and contractors of the local

government to whom it is issued. Local elected and appointed

officials and employees, agents, and contractors of the local

government shall take and direct those actions that are necessary

and advisable to maintain compliance with the financial and

operating plan.

     (2) If an order of the emergency manager or financial

management team under subsection (1) is not carried out and the

failure to carry out an order is disrupting the emergency manager's

or financial management team's ability to manage the local

government, the emergency manager or financial management team, in

addition to other remedies provided in this act, may prohibit the

local elected or appointed official or employee, agent, or

contractor of the local government from access to the local

government's office facilities, electronic mail, and internal

information systems.

     Sec. 11. (1) An emergency manager or a financial management

team shall develop and may amend a written financial and operating

plan for the local government. The plan shall must have the

objectives of assuring that the local government is able to provide

or cause to be provided governmental services essential to the

public health, safety, and welfare and assuring the fiscal

accountability of the local government. The financial and operating

plan shall must provide for all of the following:

     (a) Conducting all aspects of the operations of the local

government within the resources available according to the

emergency manager's or financial management team's revenue

estimate.

     (b) The payment in full of the scheduled debt service

requirements on all bonds, notes, and municipal securities of the

local government, contract obligations in anticipation of which

bonds, notes, and municipal securities are issued, and all other

uncontested legal obligations.

     (c) The modification, rejection, termination, and

renegotiation of contracts pursuant to section 12.

     (d) The timely deposit of required payments to the pension

fund for the local government or in which the local government

participates.

     (e) For school districts, an educational plan.

     (f) Any other actions considered necessary by the emergency

manager or financial management team in the emergency manager's or

financial management team's discretion to achieve the objectives of

the financial and operating plan, alleviate the financial

emergency, and remove the local government from receivership.

     (2) Within 45 days after the emergency manager's or financial

management team's appointment, the emergency manager or financial

management team shall submit the financial and operating plan, and

an educational plan if the local government is a school district,

to the state treasurer, with a copy to the superintendent of public

instruction if the local government is a school district, and to

the chief administrative officer and governing body of the local

government. The plan shall must be regularly reexamined by the

emergency manager or financial management team and the state

treasurer and may be modified from time to time by the emergency

manager or financial management team with notice to the state

treasurer. If the emergency manager or financial management team

reduces his or her the revenue estimates, the emergency manager or

financial management team shall modify the plan to conform to the

revised revenue estimates.

     (3) The financial and operating plan shall must be in a form

as provided by the state treasurer and shall must contain that

information for each year during which year the plan is in effect

that the emergency manager or financial management team, in

consultation with the state financial authority, specifies. The

financial and operating plan may serve as a deficit elimination

plan otherwise required by law if so approved by the state

financial authority.

     (4) The emergency manager or financial management team, within

30 days of submitting the financial and operating plan to the state

financial authority, shall conduct a public informational meeting

on the plan and any modifications to the plan. This subsection does

not mean that the emergency manager or financial management team

must receive public approval before he or she implements

implementing the plan or any modification of the plan.

     (5) For a local government in receivership immediately prior

to the effective date of this act, before March 28, 2013, a

financial and operating plan for that local government adopted

under former 2011 PA 4 or a financial plan for that local

government adopted under former 1990 PA 72 shall be is effective

and enforceable as a financial and operating plan for the local

government under this act until modified or rescinded under this

act.

     Sec. 12. (1) An emergency manager or financial management team

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 financial management team, 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 or financial management team'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 or financial management team, 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 or financial management team may

remove 1 or more of the serving trustees of the local pension board

or, if the state treasurer appoints the emergency manager or

financial management team 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 or financial management team

serves as sole trustee of the local pension board, all of the

following apply:

     (i) The emergency manager or financial management team 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 or financial management team 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 or financial management team 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 applicable standards, at the time the most recent

comprehensive annual financial report for the municipal government

was due.

     (iv) The emergency manager's or financial management team's

assumption and exercise of the authority and fiduciary

responsibilities of the local pension board shall 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 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 or financial management team, 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 or financial management team'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 or financial management team, 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 or financial management team may

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 or disapprove of the issuance of obligations of

the local government on behalf of the local government under this

subdivision. An election to approve or disapprove of the issuance

of obligations of the local government pursuant to 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

or financial management team may recommend to the state boundary

commission that the municipal government consolidate with 1 or more

other municipal governments, if the emergency manager or financial

management team 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.

     (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 or financial management

team 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 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 or

financial management team.

     (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 or financial

management team. However, if a potential contract involves a

cumulative value of $50,000.00 or more, the emergency manager or

financial management team 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 or a financial management team

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 or a financial management

team 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. 13. Upon appointment of an emergency manager or a

financial management team and during the pendency of the

receivership, the salary, wages, or other compensation, including

the accrual of postemployment benefits, and other benefits of the

chief administrative officer and members of the governing body of

the local government shall be are eliminated. This section does not

authorize the impairment of vested pension benefits. If an

emergency manager or a financial management team has reduced,

suspended, or eliminated the salary, wages, or other compensation

of the chief administrative officer and members of the governing

body of a local government before the effective date of this act,

March 28, 2013, the reduction, suspension, or elimination is valid

to the same extent had it occurred after the effective date of this

act. March 28, 2013. The emergency manager or financial management

team may restore, in whole or in part, any of the salary, wages,

other compensation, or benefits of the chief administrative officer

and members of the governing body during the pendency of the

receivership, for such time and on such terms as the emergency

manager or financial management team considers appropriate, to the

extent that the emergency manager or financial management team

finds that the restoration of salary, wages, compensation, or

benefits is consistent with the financial and operating plan.

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

this act, an emergency manager or a financial management team 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 or disapprove of the issuance of 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. 15. (1) Unless the potential sale and value of an asset

is included in the emergency manager's or financial management

team's financial and operating plan, the emergency manager or

financial management team shall not sell an asset of the local

government valued at more than $50,000.00 without the state

treasurer's approval.

     (2) A provision of an existing collective bargaining agreement

that authorizes the payment of a benefit upon the death of a police

officer or firefighter that occurs in the line of duty shall must

not be impaired and is not subject to any provision of this act

authorizing an emergency manager or a financial management team to

reject, modify, or terminate 1 or more terms of an existing

collective bargaining agreement.

     Sec. 16. An emergency manager or a financial management team

shall, on his, or her, or its own or upon the advice of the local

inspector if a local inspector has been retained, make a

determination as to whether possible criminal conduct contributed

to the financial situation resulting in the local government's

receivership status. If the emergency manager or financial

management team determines that there is reason to believe that

criminal conduct has occurred, the emergency manager or financial

management team shall refer the matter to the attorney general and

the local prosecuting attorney for investigation.

     Sec. 17. Beginning 6 months after an emergency manager's or a

financial management team's appointment, and every 3 months

thereafter, an emergency manager or a financial management team

shall submit to the governor, the state treasurer, the senate

majority leader, the speaker of the house of representatives, each

state senator and state representative who represents the local

government that is in receivership, and the clerk of the local

government that is in receivership, and shall post on the internet

on the website of the local government, a report that contains all

of the following:

     (a) A description of each expenditure made, approved, or

disapproved during the reporting period that has a cumulative value

of $5,000.00 or more and the source of the funds.

     (b) A list of each contract that the emergency manager or

financial management team awarded or approved with a cumulative

value of $5,000.00 or more, including the purpose of the contract

and the identity of the contractor.

     (c) A description of each loan sought, approved, or

disapproved during the reporting period that has a cumulative value

of $5,000.00 or more and the proposed use of the funds.

     (d) A description of any new position created or any vacancy

in a position filled by the appointing authority.

     (e) A description of any position that has been eliminated or

from which an employee has been laid off.

     (f) A copy of the contract with the emergency manager as

provided in section 9(3)(e), or a copy of the contract with each

member of the financial management team as provided in section 9a.

     (g) The salary and benefits of the emergency manager or the

salary and benefits for each member of the financial management

team.

     (h) The financial and operating plan.

     Sec. 18. (1) If, in the judgment of the emergency manager or

financial management team, no reasonable alternative to rectifying

the financial emergency of the local government which is in

receivership exists, then the emergency manager or financial

management team may recommend to the governor and the state

treasurer that the local government be authorized to proceed under

chapter 9. If the governor approves of the recommendation, the

governor shall inform the state treasurer and the emergency manager

or financial management team in writing of the decision, with a

copy to the superintendent of public instruction if the local

government is a school district. The governor may place

contingencies on a local government in order to proceed under

chapter 9. Upon receipt of the written approval, the emergency

manager or financial management team is authorized to proceed under

chapter 9. This section empowers the local government for which an

emergency manager or a financial management team has been appointed

to become a debtor under title 11 of the United States Code, 11 USC

101 to 1532, as required by section 109 of title 11 of the United

States Code, 11 USC 109, and empowers the emergency manager or

financial management team to act exclusively on the local

government's behalf in any such case under chapter 9.

     (2) The recommendation to the governor and the state treasurer

under subsection (1) shall must include 1 of the following:

     (a) A determination by the emergency manager or financial

management team that no feasible financial plan can be adopted that

can satisfactorily rectify the financial emergency of the local

government in a timely manner.

     (b) A determination by the emergency manager or financial

management team that a plan, in effect for at least 180 days,

cannot be implemented as written or as it might be amended in a

manner that can satisfactorily rectify the financial emergency in a

timely manner.

     (3) The emergency manager or financial management team shall

provide a copy of the recommendation as provided under subsection

(1) to the superintendent of public instruction if the local

government is a school district.

     Sec. 19. (1) Except as otherwise provided in this subsection,

before an emergency manager or a financial management team executes

an action under section 12(1)(k), (r), or (u) or section 14(d), he

or she the emergency manager or financial management team shall

submit his or her the proposed action to the governing body of the

local government. The governing body of the local government shall

have has 10 days from the date of submission to approve or

disapprove the action proposed by the emergency manager or

financial management team. If the governing body of the local

government does not act within 10 days, the proposed action is

considered approved by the governing body of the local government

and the emergency manager or financial management team may then

execute the proposed action. For an action under section 12(1)(r)

or section 14(d), this subsection only applies if the asset,

liability, function, or responsibility involves an amount of

$50,000.00 or more.

     (2) If the governing body of the local government disapproves

the proposed action within 10 days, the governing body of the local

government shall, within 7 days of its disapproval of the action

proposed by the emergency manager or financial management team,

submit to the local emergency financial assistance loan board an

alternative proposal that would yield substantially the same

financial result as the action proposed by the emergency manager or

financial management team. The local emergency financial assistance

loan board shall have 30 days to review both the alternative

proposal submitted by the governing body of the local government

and the action proposed by the emergency manager or financial

management team and to approve either the alternative proposal

submitted by the governing body of the local government or the

action proposed by the emergency manager or financial management

team. The local emergency financial assistance loan board shall

approve the proposal that best serves the interest of the public in

that local government. The emergency manager or financial

management team shall implement the alternative proposal submitted

by the governing body of the local government or the action

proposed by the emergency manager or financial management team,

whichever is approved by the local emergency financial assistance

loan board.

     Sec. 20. (1) An emergency manager, or each member of a

financial management team, is immune from liability as provided in

section 7(5) of 1964 PA 170, MCL 691.1407. A person employed by an

emergency manager or a financial management team is immune from

liability as provided in section 7(2) of 1964 PA 170, MCL 691.1407.

     (2) The attorney general shall defend any civil claim, demand,

or lawsuit which challenges any of the following:

     (a) The validity of this act.

     (b) The authority of a state official or officer acting under

this act.

     (c) The authority of an emergency manager or a financial

management team if the emergency manager or financial management

team is or was acting within the scope of authority for an

emergency manager or a financial management team under this act.

     (3) With respect to any aspect of a receivership under this

act, the costs incurred by the attorney general in carrying out the

responsibilities of subsection (2) for attorneys, experts, court

filing fees, and other reasonable and necessary expenses shall be

are at the expense of the local government that is subject to that

receivership and shall must be reimbursed to the attorney general

by the local government. The failure of a municipal government that

is or was in receivership to remit to the attorney general the

costs incurred by the attorney general within 30 days after written

notice to the municipal government from the attorney general of the

costs is a debt owed to this state and shall must be recovered by

the state treasurer as provided in section 17a(5) of the Glenn

Steil state revenue sharing act of 1971, 1971 PA 140, MCL 141.917a.

The failure of a school district that is or was in receivership to

remit to the attorney general the costs incurred by the attorney

general within 30 days after written notice to the school district

from the attorney general of the costs is a debt owed to this state

and shall must be recovered by the state treasurer as provided in

the state school aid act of 1979, 1979 PA 94, MCL 388.1601 to

388.1896.

     (4) An emergency manager or a financial management team may

procure and maintain, at the expense of the local government for

which the emergency manager or financial management team is

appointed, worker's compensation, general liability, professional

liability, and motor vehicle insurance for the emergency manager or

any member of the financial management team and any employee,

agent, appointee, or contractor of the emergency manager or

financial management team as may be provided to elected officials,

appointed officials, or employees of the local government. The

insurance procured and maintained by an emergency manager or a

financial management team may extend to any claim, demand, or

lawsuit asserted or costs recovered against the emergency manager

or any member of the financial management team and any employee,

agent, appointee, or contractor of the emergency manager or

financial management team from the date of appointment of the

emergency manager or financial management team to the expiration of

the applicable statute of limitation if the claim, demand, or

lawsuit asserted or costs recovered against the emergency manager

or financial management team or any employee, agent, appointee, or

contractor of the emergency manager or financial management team

resulted from conduct of the emergency manager or financial

management team or any employee, agent, appointee, or contractor of

the emergency manager or financial management team taken in

accordance with this act during the emergency manager's or

financial management team's term of service.

     (5) If, after the date that the service of an emergency

manager or a financial management team is concluded, the emergency

manager or financial management team or any employee, agent,

appointee, or contractor of the emergency manager or financial

management team is subject to a claim, demand, or lawsuit arising

from an action taken during the service of that emergency manager

or financial management team, and not covered by a procured

worker's compensation, general liability, professional liability,

or motor vehicle insurance, litigation expenses of the emergency

manager or financial management team or any employee, agent,

appointee, or contractor of the emergency manager or financial

management team, including attorney fees for civil and criminal

proceedings and preparation for reasonably anticipated proceedings,

and payments made in settlement of civil proceedings both filed and

anticipated, shall must be paid out of the funds of the local

government that is or was subject to the receivership administered

by that emergency manager or financial management team, provided

that the litigation expenses are approved by the state treasurer

and that the state treasurer determines that the conduct resulting

in actual or threatened legal proceedings that is the basis for the

payment is based upon both of the following:

     (a) The scope of authority of the person or entity seeking the

payment.

     (b) The conduct occurred on behalf of a local government while

it was in receivership under this act.

     (6) The failure of a municipal government to honor and remit

the legal expenses of a former emergency manager or financial

management team or any employee, agent, appointee, or contractor of

the emergency manager or financial management team as required by

this section is a debt owed to this state and shall must be

recovered by the state treasurer as provided in section 17a(5) of

the Glenn Steil state revenue sharing act of 1971, 1971 PA 140, MCL

141.917a. The failure of a school district to honor and remit the

legal expenses of a former emergency manager or financial

management team or any employee, agent, appointee, or contractor of

the emergency manager or financial management team as required by

this section is a debt owed to this state and shall must be

recovered by the state treasurer as provided in the state school

aid act of 1979, 1979 PA 94, MCL 388.1601 to 388.1896.

     Sec. 21. (1) Before the termination of receivership and the

completion of the emergency manager's or financial management

team's term, or if a receivership transition advisory board is

appointed under section 23, then before the receivership transition

advisory board is appointed, the emergency manager or financial

management team shall adopt and implement a 2-year budget,

including all contractual and employment agreements, for the local

government commencing with the termination of receivership.

     (2) After the completion of the emergency manager's or

financial management team's term and the termination of

receivership, the governing body of the local government shall not

amend the 2-year budget adopted under subsection (1) without the

approval of the state treasurer, and shall not revise any order or

ordinance implemented by the emergency manager or financial

management team during his or her the term prior to 1 year after

the termination of receivership.

     Sec. 22. (1) If an emergency manager or a financial management

team determines that the financial emergency that he or she the

emergency manager or financial management team was appointed to

manage has been rectified, the emergency manager or financial

management team shall inform the governor and the state treasurer.

     (2) If the governor disagrees with the emergency manager's or

financial management team's determination that the financial

emergency has been rectified, the governor shall inform the

emergency manager or financial management team and the term of the

emergency manager or financial management team shall continue or

the governor shall before the effective date of the amendatory act

that added section 9a appoint a new emergency manager or beginning

on the effective date of the amendatory act that added section 9a

appoint a new financial management team.

     (3) Subject to subsection (4), if the governor agrees that the

financial emergency has been rectified, the emergency manager or

financial management team has adopted a 2-year budget as required

under section 21, and the financial conditions of the local

government have been corrected in a sustainable fashion as required

under section 9(7) or 9a(16), the governor may do either of the

following:

     (a) Remove the local government from receivership.

     (b) Appoint a receivership transition advisory board as

provided in section 23.

     (4) Before removing a local government from receivership, the

governor may impose 1 or more of the following conditions on the

local government:

     (a) The implementation of financial best practices within the

local government.

     (b) The adoption of a model charter or model charter

provisions.

     (c) Pursue financial or managerial training to ensure that

official responsibilities are properly discharged.

     Sec. 24. The governor may, upon his or her own initiative or

after receiving a recommendation from a receivership transition

advisory board, determine that the financial conditions of a local

government have not been corrected in a sustainable fashion as

required under section 9(7) or 9a(16) and before the effective date

of the amendatory act that added section 9a appoint a new emergency

manager or beginning on the effective date of the amendatory act

that added section 9a appoint a new financial management team.

     Sec. 27. (1) The local elected and appointed officials and

employees, agents, and contractors of a local government shall

promptly and fully provide the assistance and information necessary

and properly requested by the state financial authority, a review

team, or the emergency manager or financial management team in the

effectuation of their duties and powers and of the purposes of this

act. If the review team or emergency manager or financial

management team believes that a local elected or appointed official

or employee, agent, or contractor of the local government is not

answering questions accurately or completely or is not furnishing

information requested, the review team or emergency manager or

financial management team may issue subpoenas and administer oaths

to the local elected or appointed official or employee, agent, or

contractor to furnish answers to questions or to furnish documents

or records, or both. If the local elected or appointed official or

employee, agent, or contractor refuses, the review team or

emergency manager or financial management team may bring an action

in the circuit court in which the local government is located or

the Michigan court of claims, as determined by the review team or

emergency manager or financial management team, to compel testimony

and furnish records and documents. An action in mandamus may be

used to enforce this section.

     (2) Failure of a local government official to abide by this

act shall be is considered gross neglect of duty, which the review

team or emergency manager or financial management team may report

to the state financial authority and the attorney general.

Following review and a hearing with a local government elected

official, the state financial authority may recommend to the

governor that the governor remove the elected official from office.

If the governor removes the elected official from office, the

resulting vacancy in office shall must be filled as prescribed by

law.

     (3) A local government placed in receivership under this act

is not subject to section 15(1) of 1947 PA 336, MCL 423.215, for a

period of 5 years from the date the local government is placed in

receivership or until the time the receivership is terminated,

whichever occurs first.

     Sec. 28. This act does not give the emergency manager or

financial management team or the state financial authority the

power to impose taxes, over and above those already authorized by

law, without the approval at an election of a majority of the

qualified electors voting on the question.

     Enacting section 1. This amendatory act takes effect 90 days

after the date it is enacted into law.