SB366: Bill Text

LRB-2991/3

MES:wlj&jld:jf

2007 - 2008 LEGISLATURE

2007 Senate BILL 366

December 21, 2007 - Introduced by Senators Coggs, Taylor, Darling, Plale and Lazich, cosponsored by Representatives Stone, Honadel, Young, Zepnick, Fields, Sinicki, A. Williams, Ballweg, Hahn, Turner and Vos. Referred to Joint Survey Committee on Retirement Systems.

SB366,1,5 An Act to amend 59.605 (1) (a), 67.01 (9) (intro.), 67.04 (5) (b) 4. and 67.12 (12) (a); and to create 59.85, 59.86, 59.87, 66.0602 (3) (d) 3., 66.0603 (1m) (e), 66.0603 (5) and 67.045 (1) (g) of the statutes; relating to: unfunded pension liability financing in populous counties and membership on the pension study committee.

Analysis by the Legislative Reference Bureau

This bill authorizes a county with a population of 500,000 or more (currently only Milwaukee County) to issue appropriation bonds on a one-time basis, other than refunding bonds, to pay all or any part of the county's unfunded prior service liability with respect to an employee retirement system of the county. "Appropriation bonds" are defined as any bond, note, or other obligation of a county issued as provided in the bill to evidence the county's obligation to repay borrowed money that is payable from various sources, including the following:

1. Moneys annually appropriated by the county for debt service due with respect to the appropriation bonds.

2. Proceeds of the sale of the appropriation bonds.

3. Investment earnings on the items listed above.

Before the county may issue appropriation bonds, however, the county must enact an ordinance to implement a five-year strategic and financial plan related to the payment of unfunded employee retirement benefits. The financial plan shall provide that future annual pension liabilities are funded on a current basis, and the financial plan must contain quantifiable benchmarks to measure compliance with the plan. Annually, the county board must report to the legislature, the Department of Revenue (DOR), the Department of Administration, and the governor on a number of issues related to the appropriation bonds, including the county's progress in meeting the benchmarks, whether the county fully funds the normal cost contribution for its employee retirement system and the amount that the actuary determines is the county's required contribution to that system. If the county does not fully fund the lower of either the required cost contribution for a particular year or the normal cost for that year, DOR must reduce and withhold from the county's shared revenue payments the difference between its required cost contribution and the amount the county actually contributes to the system for that year. DOR must deposit the withheld amount into the county's employee retirement system.

The bill states that a populous county is not generally liable for appropriation bonds, and appropriation bonds are not a debt of the county for any purpose whatsoever. Appropriation bonds, including the principal and interest payments, are payable only from amounts that the county board may, from year to year, appropriate.

For further information see the local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB366, s. 1 Section 1. 59.605 (1) (a) of the statutes is amended to read:

SB366,2,5 59.605 (1) (a) "Debt levy" means the county purpose levy for debt service on loans under subch. II of ch. 24, bonds issued under s. 67.05 and, promissory notes issued under s. 67.12 (12), and appropriation bonds issued under s. 59.85, less any revenues that abate the levy.

SB366, s. 2 Section 2. 59.85 of the statutes is created to read:

SB366,2,8 59.85 Appropriation bonds for payment of employee retirement system liability in populous counties. (1) Definitions. In this section:

SB366,2,11 (a) "Appropriation bond" means a bond issued by a county to evidence its obligation to repay a certain amount of borrowed money that is payable from all of the following:

SB366,3,2 1. Moneys annually appropriated by law for debt service due with respect to such appropriation bond in that year.

SB366,3,3 2. Proceeds of the sale of such appropriation bonds.

SB366,3,5 3. Payments received for that purpose under agreements and ancillary arrangements described in s. 59.86.

SB366,3,6 4. Investment earnings on amounts in subds. 1. to 3.

SB366,3,7 (b) "Board" means the county board of supervisors in any county.

SB366,3,9 (c) "Bond" means any bond, note, or other obligation of a county issued under this section.

SB366,3,10 (d) "County" means any county having a population of 500,000 or more.

SB366,3,12 (e) "Refunding bond" means an appropriation bond issued to fund or refund all or any part of one or more outstanding pension-related bonds.

SB366,3,19 (1m) Legislative finding and determination. Recognizing that a county, by prepaying part or all of the county's unfunded prior service liability with respect to an employee retirement system of the county, may reduce its costs and better ensure the timely and full payment of retirement benefits to participants and their beneficiaries under the employee retirement system, the legislature finds and determines that it is in the public interest for the county to issue appropriation bonds to obtain proceeds to pay its unfunded prior service liability.

SB366,3,22 (2) Authorization of appropriation bonds. (a) A board shall have all powers necessary and convenient to carry out its duties, and to exercise its authority, under this section.

SB366,4,5 (b) Subject to pars. (c) and (d), a county may issue appropriation bonds under this section to pay all or any part of the county's unfunded prior service liability with respect to an employee retirement system of the county, or to fund or refund outstanding appropriation bonds issued under this section. A county may use proceeds of appropriation bonds to pay issuance or administrative expenses, to make deposits to reserve funds, to pay accrued or funded interest, to pay the costs of credit enhancement, to make payments under other agreements entered into under s. 59.86, or to make deposits to stabilization funds established under s. 59.87.

SB366,4,7 (c) Other than refunding bonds issued under sub. (6), all bonds must be issued simultaneously.

SB366,4,19 (d) 1. Before a county may issue appropriation bonds under par. (b), its board shall enact an ordinance that establishes a 5-year strategic and financial plan related to the payment of all or any part of the county's unfunded prior service liability with respect to an employee retirement system of the county. The strategic and financial plan shall provide that future annual pension liabilities are funded on a current basis. The strategic and financial plan shall contain quantifiable benchmarks to measure compliance with the plan. The board shall make a determination that the ordinance meets the requirements of this subdivision and, absent manifest error, the board's determination shall be conclusive. The board shall submit to the governor and to the chief clerk of each house of the legislature, for distribution to the legislature under s. 13.172 (2), a copy of the strategic and financial plan.

SB366,4,23 2. Annually, the county shall submit to the governor, the department of revenue, and the department of administration, and to the chief clerk of each house of the legislature, for distribution to the legislature under s. 13.172 (2), a report that includes all of the following:

SB366,4,25 a. The county's progress in meeting the benchmarks in the strategic and financial plan.

SB366,5,1 b. Any proposed modifications to the plan.

SB366,5,2 c. The status of any stabilization fund that is established under s. 59.87 (3).

SB366,5,4 d. The most current actuarial report related to the county's employee retirement system.

SB366,5,8 e. The amount, if any, by which the county's contributions to the employee retirement system for the prior year is less than the normal cost contribution for that year as specified in the initial actuarial report for the county's employee retirement system for that year.

SB366,5,10 f. The amount that the actuary determines is the county's required contribution to the employee retirement system for that year.

SB366,5,19 (2m) Penalty for inadequate contribution. If the county's contributions to the employee retirement system for the prior year is less than the lower of the required contribution for that year, as described in sub. (2) (d) 2. f., or the normal cost for that year, the department of revenue shall reduce and withhold the amount of the shared revenue payments to the county under subch. I of ch. 79, in the following year, by an amount equal to the difference between the required cost contribution for that prior year and the county's actual contribution in that prior year. The department of revenue shall deposit the amount of the reduced and withheld shared revenue payment into the county's employee retirement system.

SB366,6,2 (3) Terms. (a) A county may borrow moneys and issue appropriation bonds in evidence of the borrowing pursuant to one or more written authorizing resolutions under sub. (4). Unless otherwise provided in an authorizing resolution, the county may issue appropriation bonds at any time, in any specific amounts, at any rates of interest, for any term, payable at any intervals, at any place, in any manner, and having any other terms or conditions that the board considers necessary or desirable. Appropriation bonds may bear interest at variable or fixed rates, bear no interest, or bear interest payable only at maturity or upon redemption prior to maturity.

SB366,6,5 (b) The board may authorize appropriation bonds having any provisions for prepayment the board considers necessary or desirable, including the payment of any premium.

SB366,6,8 (c) Interest shall cease to accrue on an appropriation bond on the date that the appropriation bond becomes due for payment if payment is made or duly provided for.

SB366,6,11 (d) All moneys borrowed by a county that is evidenced by appropriation bonds issued under this section shall be lawful money of the United States, and all appropriation bonds shall be payable in such money.

SB366,6,17 (e) All appropriation bonds owned or held by a fund of the county are outstanding in all respects and the board or other governing body controlling the fund shall have the same rights with respect to an appropriation bond as a private party, but if any sinking fund acquires appropriation bonds that gave rise to such fund, the appropriation bonds are considered paid for all purposes and no longer outstanding and shall be canceled as provided in sub. (7) (d).

SB366,6,22 (f) A county shall not be generally liable on appropriation bonds, and appropriation bonds shall not be a debt of the county for any purpose whatsoever. Appropriation bonds, including the principal thereof and interest thereon, shall be payable only from amounts that the board may, from year to year, appropriate for the payment thereof.

SB366,7,4 (4) Procedures. (a) No appropriation bonds may be issued by a county unless the issuance is pursuant to a written authorizing resolution adopted by a majority of a quorum of the board. The resolution may be in the form of a resolution or trust indenture, and shall set forth the aggregate principal amount of appropriation bonds authorized thereby, the manner of their sale, and the form and terms thereof. The resolution or trust indenture may establish such funds and accounts, including a reserve fund, as the board determines.

SB366,7,8 (b) Appropriation bonds may be sold at either public or private sale and may be sold at any price or percentage of par value. All appropriation bonds sold at pubic sale shall be noticed as provided in the authorizing resolution. Any bid received at pubic sale may be rejected.