LRB-2608/6
MES:wlj&jld:sh
2007 - 2008 LEGISLATURE
January 3, 2008 - Introduced by Representatives Stone, Honadel, Young, Zepnick,
Fields, Sinicki, A. Williams, Ballweg, Hahn, Turner and Vos, cosponsored by
Senators Coggs, Taylor, Darling, Plale and
Lazich. Referred to Committee
on Urban and Local Affairs.
AB666,1,5
1An Act to amend 59.605 (1) (a), 67.01 (9) (intro.), 67.04 (5) (b) 4., 67.12 (12) (a)
2and 67.15 (2) (intro.); and
to create 59.85, 59.86, 59.87, 66.0602 (3) (d) 3.,
366.0603 (1m) (e), 66.0603 (5) and 67.045 (1) (g) of the statutes;
relating to:
4unfunded pension liability financing in populous counties and membership on
5the 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.
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:
AB666, s. 1
1Section
1. 59.605 (1) (a) of the statutes is amended to read:
AB666,2,52
59.605
(1) (a) "Debt levy" means the county purpose levy for debt service on
3loans under subch. II of ch. 24, bonds issued under s. 67.05
and, promissory notes
4issued under s. 67.12 (12),
and appropriation bonds issued under s. 59.85, less any
5revenues that abate the levy.
AB666, s. 2
6Section
2. 59.85 of the statutes is created to read:
AB666,2,8
759.85 Appropriation bonds for payment of employee retirement
8system liability in populous counties. (1) Definitions. In this section:
AB666,2,119
(a) "Appropriation bond" means a bond issued by a county to evidence its
10obligation to repay a certain amount of borrowed money that is payable from any of
11the following:
AB666,2,1312
1. Moneys annually appropriated by law for debt service due with respect to
13such appropriation bond in that year.
AB666,3,1
12. Proceeds of the sale of such appropriation bonds.
AB666,3,32
3. Payments received for that purpose under agreements and ancillary
3arrangements described in s. 59.86.
AB666,3,44
4. Investment earnings on amounts in subds. 1. to 3.
AB666,3,55
(b) "Board" means the county board of supervisors in any county.
AB666,3,76
(c) "Bond" means any bond, note, or other obligation of a county issued under
7this section.
AB666,3,88
(d) "County" means any county having a population of 500,000 or more.
AB666,3,109
(e) "Refunding bond" means an appropriation bond issued to fund or refund all
10or any part of one or more outstanding pension-related bonds.
AB666,3,17
11(1m) Legislative finding and determination. Recognizing that a county, by
12prepaying part or all of the county's unfunded prior service liability with respect to
13an employee retirement system of the county, may reduce its costs and better ensure
14the timely and full payment of retirement benefits to participants and their
15beneficiaries under the employee retirement system, the legislature finds and
16determines that it is in the public interest for the county to issue appropriation bonds
17to obtain proceeds to pay its unfunded prior service liability.
AB666,3,20
18(2) Authorization of appropriation bonds. (a) A board shall have all powers
19necessary and convenient to carry out its duties, and to exercise its authority, under
20this section.
AB666,4,321
(b) Subject to pars. (c) and (d), a county may issue appropriation bonds under
22this section to pay all or any part of the county's unfunded prior service liability with
23respect to an employee retirement system of the county, or to fund or refund
24outstanding appropriation bonds issued under this section. A county may use
25proceeds of appropriation bonds to pay issuance or administrative expenses, to make
1deposits to reserve funds, to pay accrued or funded interest, to pay the costs of credit
2enhancement, to make payments under other agreements entered into under s.
359.86, or to make deposits to stabilization funds established under s. 59.87.
AB666,4,54
(c) Other than refunding bonds issued under sub. (6), all bonds must be issued
5simultaneously.
AB666,4,176
(d) 1. Before a county may issue appropriation bonds under par. (b), its board
7shall enact an ordinance that establishes a 5-year strategic and financial plan
8related to the payment of all or any part of the county's unfunded prior service
9liability with respect to an employee retirement system of the county. The strategic
10and financial plan shall provide that future annual pension liabilities are funded on
11a current basis. The strategic and financial plan shall contain quantifiable
12benchmarks to measure compliance with the plan. The board shall make a
13determination that the ordinance meets the requirements of this subdivision and,
14absent manifest error, the board's determination shall be conclusive. The board shall
15submit to the governor and to the chief clerk of each house of the legislature, for
16distribution to the legislature under s. 13.172 (2), a copy of the strategic and financial
17plan.
AB666,4,2118
2. Annually, the county shall submit to the governor, the department of
19revenue, and the department of administration, and to the chief clerk of each house
20of the legislature, for distribution to the legislature under s. 13.172 (2), a report that
21includes all of the following:
AB666,4,2322
a. The county's progress in meeting the benchmarks in the strategic and
23financial plan.
AB666,4,2424
b. Any proposed modifications to the plan.
AB666,4,2525
c. The status of any stabilization fund that is established under s. 59.87 (3).
AB666,5,2
1d. The most current actuarial report related to the county's employee
2retirement system.
AB666,5,63
e. The amount, if any, by which the county's contributions to the employee
4retirement system for the prior year is less than the normal cost contribution for that
5year as specified in the initial actuarial report for the county's employee retirement
6system for that year.
AB666,5,87
f. The amount that the actuary determines is the county's required contribution
8to the employee retirement system for that year.
AB666,5,17
9(2m) Penalty for inadequate contribution. If the county's contributions to
10the employee retirement system for the prior year is less than the lower of the
11required contribution for that year, as described in sub. (2) (d) 2. f., or the normal cost
12for that year, the department of revenue shall reduce and withhold the amount of the
13shared revenue payments to the county under subch. I of ch. 79, in the following year,
14by an amount equal to the difference between the required cost contribution for that
15prior year and the county's actual contribution in that prior year. The department
16of revenue shall deposit the amount of the reduced and withheld shared revenue
17payment into the county's employee retirement system.
AB666,5,25
18(3) Terms. (a) A county may borrow moneys and issue appropriation bonds in
19evidence of the borrowing pursuant to one or more written authorizing resolutions
20under sub. (4). Unless otherwise provided in an authorizing resolution, the county
21may issue appropriation bonds at any time, in any specific amounts, at any rates of
22interest, for any term, payable at any intervals, at any place, in any manner, and
23having any other terms or conditions that the board considers necessary or desirable.
24Appropriation bonds may bear interest at variable or fixed rates, bear no interest,
25or bear interest payable only at maturity or upon redemption prior to maturity.
AB666,6,3
1(b) The board may authorize appropriation bonds having any provisions for
2prepayment the board considers necessary or desirable, including the payment of
3any premium.
AB666,6,64
(c) Interest shall cease to accrue on an appropriation bond on the date that the
5appropriation bond becomes due for payment if payment is made or duly provided
6for.
AB666,6,97
(d) All moneys borrowed by a county that is evidenced by appropriation bonds
8issued under this section shall be lawful money of the United States, and all
9appropriation bonds shall be payable in such money.
AB666,6,1510
(e) All appropriation bonds owned or held by a fund of the county are
11outstanding in all respects and the board or other governing body controlling the
12fund shall have the same rights with respect to an appropriation bond as a private
13party, but if any sinking fund acquires appropriation bonds that gave rise to such
14fund, the appropriation bonds are considered paid for all purposes and no longer
15outstanding and shall be canceled as provided in sub. (7) (d).
AB666,6,1916
(f) A county shall not be generally liable on appropriation bonds, and
17appropriation bonds shall not be a debt of the county for any purpose whatsoever.
18Appropriation bonds, including the principal thereof and interest thereon, shall be
19payable only from amounts specified in sub. (1) (a).
AB666,7,2
20(4) Procedures. (a) No appropriation bonds may be issued by a county unless
21the issuance is pursuant to a written authorizing resolution adopted by a majority
22of a quorum of the board. The resolution may be in the form of a resolution or trust
23indenture, and shall set forth the aggregate principal amount of appropriation bonds
24authorized thereby, the manner of their sale, and the form and terms thereof. The
1resolution or trust indenture may establish such funds and accounts, including a
2reserve fund, as the board determines.
AB666,7,63
(b) Appropriation bonds may be sold at either public or private sale and may
4be sold at any price or percentage of par value. All appropriation bonds sold at public
5sale shall be noticed as provided in the authorizing resolution. Any bid received at
6public sale may be rejected.
AB666,7,9
7(5) Form. (a) As determined by the board, appropriation bonds may be issued
8in book-entry form or in certificated form. Notwithstanding s. 403.104 (1), every
9evidence of appropriation bond is a negotiable instrument.
AB666,7,1710
(b) Every appropriation bond shall be executed in the name of and for the
11county by the chairperson of the board and the clerk, and shall be sealed with the seal
12of the county, if any. Facsimile signatures of either officer may be imprinted in lieu
13of manual signatures, but the signature of at least one such officer shall be manual.
14An appropriation bond bearing the manual or facsimile signature of a person in office
15at the same time the signature was signed or imprinted shall be fully valid
16notwithstanding that before or after the delivery of such appropriation bond the
17person ceased to hold such office.
AB666,7,2118
(c) Every appropriation bond shall be dated not later than the date it is issued,
19shall contain a reference by date to the appropriate authorizing resolution, shall
20state the limitation established in sub. (3) (f), and shall be in accordance with the
21appropriate authorizing resolution in all respects.
AB666,7,2422
(d) An appropriation bond shall be substantially in such form and contain such
23statements or terms as determined by the board, and may not conflict with law or
24with the appropriate authorizing resolution.
AB666,8,18
1(6) Refunding bonds. (a) 1. A board may authorize the issuance of refunding
2appropriation bonds. Refunding appropriation bonds may be issued, subject to any
3contract rights vested in owners of the appropriation bonds being refunded, to refund
4all or any part of one or more issues of appropriation bonds, notwithstanding that the
5appropriation bonds may have been issued at different times, or issues of general
6obligation promissory notes under s. 67.12 (12) that were issued to pay unfunded
7prior service liability with respect to an employee retirement system. The principal
8amount of the refunding appropriation bonds may not exceed the sum of: the
9principal amount of the appropriation bonds or general obligation promissory notes
10being refunded; applicable redemption premiums; unpaid interest on the refunded
11appropriation bonds or general obligation promissory notes to the date of delivery or
12exchange of the refunding appropriation bonds; in the event the proceeds are to be
13deposited in trust as provided in par. (c), interest to accrue on the appropriation
14bonds or general obligation promissory notes to be refunded from the date of delivery
15to the date of maturity or to the redemption date selected by the board, whichever
16is earlier; and the expenses incurred in the issuance of the refunding appropriation
17bonds and the payment of the refunded appropriation bonds or general obligation
18promissory notes.
AB666,8,2119
2. A board may authorize the issuance of general obligation promissory notes
20under s. 67.12 (12) (a) to refund appropriation bonds, notwithstanding s. 67.01 (9)
21(intro.).
AB666,9,1022
(b) If a board determines to exchange refunding appropriation bonds, they may
23be exchanged privately for, and in payment and discharge of, any of the outstanding
24appropriation bonds being refunded. Refunding appropriation bonds may be
25exchanged for such principal amount of the appropriation bonds being exchanged
1therefor as may be determined by the board to be necessary or desirable. The owners
2of the appropriation bonds being refunded who elect to exchange need not pay
3accrued interest on the refunding appropriation bonds if and to the extent that
4interest is accrued and unpaid on the appropriation bonds being refunded and to be
5surrendered. If any of the appropriation bonds to be refunded are to be called for
6redemption, the board shall determine which redemption dates are to be used, if
7more than one date is applicable and shall, prior to the issuance of the refunding
8appropriation bonds, provide for notice of redemption to be given in the manner and
9at the times required by the resolution authorizing the appropriation bonds to be
10refunded.
AB666,9,1611
(c) 1. The principal proceeds from the sale of any refunding appropriation bonds
12shall be applied either to the immediate payment and retirement of the
13appropriation bonds or general obligation promissory notes being refunded or, if the
14bonds or general obligation promissory notes have not matured and are not presently
15redeemable, to the creation of a trust for, and shall be pledged to the payment of, the
16appropriation bonds or general obligation promissory notes being refunded.
AB666,9,2517
2. If a trust is created, a separate deposit shall be made for each issue of
18appropriation bonds or general obligation promissory notes being refunded. Each
19deposit shall be with a bank or trust company authorized by the laws of the United
20States or of a state in which it is located to conduct banking or trust company
21business. If the total amount of any deposit, including moneys other than sale
22proceeds but legally available for such purpose, is less than the principal amount of
23the appropriation bonds or general obligation promissory notes being refunded and
24for the payment of which the deposit has been created and pledged, together with
25applicable redemption premiums and interest accrued and to accrue to maturity or
1to the date of redemption, then the application of the sale proceeds shall be legally
2sufficient only if the moneys deposited are invested in securities issued by the United
3States or one of its agencies, or securities fully guaranteed by the United States, and
4only if the principal amount of the securities at maturity and the income therefrom
5to maturity will be sufficient and available, without the need for any further
6investment or reinvestment, to pay at maturity or upon redemption the principal
7amount of the appropriation bonds or general obligation promissory notes being
8refunded together with applicable redemption premiums and interest accrued and
9to accrue to maturity or to the date of redemption. The income from the principal
10proceeds of the securities shall be applied solely to the payment of the principal of
11and interest and redemption premiums on the appropriation bonds or general
12obligation promissory notes being refunded, but provision may be made for the
13pledging and disposition of any surplus.
AB666,10,2014
3. Nothing in this paragraph may be construed as a limitation on the duration
15of any deposit in trust for the retirement of appropriation bonds or general obligation
16promissory notes being refunded that have not matured and that are not presently
17redeemable. Nothing in this paragraph may be construed to prohibit reinvestment
18of the income of a trust if the reinvestments will mature at such times that sufficient
19moneys will be available to pay interest, applicable premiums, and principal on the
20appropriation bonds or general obligation promissory notes being refunded.
AB666,11,7
21(7) Fiscal regulations. (a) All appropriation bonds shall be registered by the
22clerk or treasurer of the county issuing the appropriation bonds, or such other
23officers or agents, including fiscal agents, as the board may determine. After
24registration, no transfer of an appropriation bond is valid unless made by the
25registered owner or the registered owner's duly authorized attorney on the records
1of the county and similarly noted on the appropriation bond. The county may treat
2the registered owner as the owner of the appropriation bond for all purposes.
3Payments of principal and interest shall be by electronic funds transfer, check, share
4draft, or other draft to the registered owner at the owner's address as it appears on
5the register, unless the board has otherwise provided. Information in the register is
6not available for inspection and copying under s. 19.35 (1). The board may make any
7other provision respecting registration as it considers necessary or desirable.
AB666,11,208
(b) The board may appoint one or more trustees or fiscal agents for each issue
9of appropriation bonds. The treasurer may be designated as the trustee and the sole
10fiscal agent or as cofiscal agent for any issue of appropriation bonds. Every other
11fiscal agent shall be an incorporated bank or trust company authorized by the laws
12of the United States or of the state in which it is located to conduct banking or trust
13company business. There may be deposited with a trustee, in a special account,
14moneys to be used only for the purposes expressly provided in the resolution
15authorizing the issuance of appropriation bonds or an agreement between the county
16and the trustee. The board may make other provisions respecting trustees and fiscal
17agents as the board considers necessary or desirable and may enter into contracts
18with any trustee or fiscal agent containing such terms, including compensation, and
19conditions in regard to the trustee or fiscal agent as the board considers necessary
20or desirable.
AB666,12,321
(c) If any appropriation bond is destroyed, lost, or stolen, the county shall
22execute and deliver a new appropriation bond, upon filing with the treasurer
23evidence satisfactory to the treasurer that the appropriation bond has been
24destroyed, lost, or stolen, upon providing proof of ownership thereof, and upon
25furnishing the treasurer with indemnity satisfactory to the treasurer and complying
1with such other rules of the county and paying any expenses that the county may
2incur. In the county's records, the treasurer shall cancel the appropriation bond that
3has been destroyed, lost, or stolen.
AB666,12,74
(d) Unless otherwise directed by the board, every appropriation bond paid or
5otherwise retired shall be marked "canceled" and delivered to the treasurer, or to
6such other fiscal agent as applicable with respect to the appropriation bond, who
7shall destroy them and deliver a certificate to that effect to the clerk.
AB666,12,10
8(8) Appropriation bonds as legal investments. Any of the following may
9legally invest any sinking funds, moneys, or other funds belonging to them or under
10their control in any appropriation bonds issued under this section:
AB666,12,1211
(a) The state, the investment board, public officers, municipal corporations,
12political subdivisions, and public bodies.
AB666,12,1613
(b) Banks and bankers, savings and loan associations, credit unions, trust
14companies, savings banks and institutions, investment companies, insurance
15companies, insurance associations, and other persons carrying on a banking or
16insurance business.
AB666,12,1717
(c) Personal representatives, guardians, trustees, and other fiduciaries.
AB666,13,2
18(9) Moral obligation pledge. If the board considers it necessary or desirable
19to do so, it may express in a resolution authorizing appropriation bonds its
20expectation and aspiration to make timely appropriations sufficient to pay the
21principal and interest due with respect to such appropriation bonds, to make
22deposits into a reserve fund created under sub. (4) (a) with respect to such
23appropriation bonds, to make payments under any agreement or ancillary
24arrangement entered into under s. 59.86 with respect to such appropriation bonds,
25to make deposits into any stabilization fund established or continued under s. 59.87
1with respect to such appropriation bonds, or to pay related issuance or
2administrative expenses.
AB666,13,5
3(10) Pension study committee. The 2 public members of the pension study
4committee, created by
chapter 405, laws of 1965, shall have at least 10 years of
5financial experience.
AB666,13,7
6(11) Applicability. This section does not apply if a county does not issue
7appropriation bonds as authorized under sub. (2).
AB666, s. 3
8Section
3. 59.86 of the statutes is created to read:
AB666,13,22
959.86 Agreements and ancillary arrangements for certain notes and
10appropriation bonds. At the time of issuance or in anticipation of the issuance of
11appropriation bonds under s. 59.85, or general obligation promissory notes under s.
1267.12 (12), to pay unfunded prior service liability with respect to an employee
13retirement system, or at any time thereafter so long as the appropriation bonds or
14general obligation promissory notes are outstanding, a county having a population
15of 500,000 or more may enter into agreements or ancillary arrangements relating to
16the appropriation bonds or general obligation promissory notes, including trust
17indentures, liquidity facilities, remarketing or dealer agreements, letters of credit,
18insurance policies, guaranty agreements, reimbursement agreements, indexing
19agreements, interest exchange agreements, or other similar agreements. Any
20payments made or amounts received with respect to any such agreement or ancillary
21arrangement shall be made from or deposited as provided in the agreement or
22ancillary arrangement.
AB666, s. 4
23Section
4. 59.87 of the statutes is created to read:
AB666,13,25
2459.87 Employee retirement system liability financing in populous
25counties; additional powers. (1) Definitions. In this section: