NOTES & BONDS; MODIFY REQ. S.B. 379:
ANALYSIS AS PASSED BY THE SENATE
Senate Bill 379 (as passed by the Senate)
Committee: Transportation and Infrastructure
RATIONALE
Michigan's Constitution grants the Legislature the authority to issue bonds for the purpose of transportation funding.[1] Through the Michigan Transportation Fund law, the Legislature delegated that authority to the State Transportation Commission (STC) and the STC has granted the Michigan Department of Transportation (MDOT) authority to issue bonds for a variety of transportation programs. The law requires the STC to provide to the full appropriations committees of each house of the Legislature a 30-day notice that includes the projects for which a bond will be issued. The law also establishes a limit on MDOT's debt service payments on bonds. Some people believe that these provisions do not offer enough oversight concerning the use of bonds. Accordingly, it has been suggested that the Legislature adopt increased measures to oversee the issuance of bonds for transportation funding purposes.
CONTENT
The bill would amend the Michigan Transportation Fund law to do the following:
-- Prohibit notes or bonds authorized under the law from being issued until after the STC presented its resolution authorizing the notes or bonds to the Legislature and the Legislature approved it by concurrent resolution adopted by two-thirds of each house of the Legislature.
-- Require a resolution of the STC to amend an initial resolution authorizing bonds or notes to be approved by concurrent resolution adopted by two-thirds of each house of the Legislature.
-- Allow the STC or the Legislature to withdraw unused bond authorization by resolution.
-- Modify, from 50% to 20%, the limit for which taxes imposed for transportation funding can be used for debt service on the total amount of bonds and notes issued for transportation purposes.
-- Require MDOT to submit a report on October 1 of each year, and an updated report within 30 days after issuing new bonds, on transportation debt service to the members of the House of Representatives and Senate Appropriations Committees and transportation subcommittees, and committees with jurisdiction over transportation.
Legislative Authorization for Issuance of Bonds
Under the law, the STC may borrow money and issue notes or bonds for specified purposes, including to pay all or any portion of or to make loans, grants, or contract payments to pay all or any portion of capital costs as described in Article IX, Section 9 of the State Constitution, among other purposes. (Article IX, Section 9 of the State Constitution requires taxes imposed directly or indirectly on fuels for motor vehicles to be used exclusively for transportation purposes as specified in that section.)
The law prohibits the notes or bonds from being issued until after the STC gives authorization by resolution. The resolution must contain an irrevocable pledge providing for the payment of the principal and interest on the notes or bonds from money that is restricted as to use by Article IX, Section 9; a brief statement describing the projects for which the notes or bonds are to be issued; the estimated cost of the projects or refunding or refinancing; and the detail of the notes and bonds, including the maturity date or dates and maximum interest rate of the notes or bonds.
Under the bill, the notes or bonds could not be issued until after the STC's authorization by resolution and until the STC presented the resolution to the Legislature, and the Legislature approved it by concurrent resolution adopted by two-thirds of each house of the Legislature.
The law specifies that if, after the issuance of notes or bonds, the STC determines that a project for which the notes or bonds are to be issued should be changed, it must amend the resolution authorizing the bonds by a