HB3708eng 103RD GENERAL ASSEMBLY

HB3708 Engrossed LRB103 26193 AWJ 52552 b

AN ACT concerning local government.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Municipal Code is amended by changing Sections 8-12-2, 8-12-3, 8-12-4, and 8-12-23 and by adding Sections 8-12-4.5, 8-12-10.5, and 8-12-21.5 as follows:

(65 ILCS 5/8-12-2) (from Ch. 24, par. 8-12-2)

Sec. 8-12-2. (a) Pursuant to the authority of the General Assembly to provide for the public health, safety and welfare, the General Assembly hereby finds and declares that it is the public policy and a public purpose of the State to offer assistance to a financially distressed city so that it may provide for the health, safety and welfare of its citizens, pay when due principal and interest on its debt obligations, meet financial obligations to its employees, vendors and suppliers, and provide for proper financial accounting procedures, budgeting and taxing practices, as well as strengthen the human and economic development of the city.

(b) It is the purpose of this Division to provide a secure financial basis for the continued operation of a financially distressed city. The intention of the General Assembly, in enacting this legislation is to establish sound, efficient and generally accepted accounting, budgeting and taxing procedures and practices within a financially distressed city, to provide powers to a financial advisory authority established for a financially distressed city, and to impose restrictions upon a financially distressed city in order to assist that city in assuring its financial integrity while leaving municipal services policies to the city, consistent with the requirements for satisfying the public policy and purposes herein set forth.

(c) It also is the purpose of this Division to authorize a city which has been certified and designated as a financially distressed city under the procedure set forth in Section 8-12-4, and which has by ordinance requested that a financial advisory authority be appointed for the city and that the city receive assistance as provided in this Division, and which has filed certified copies of that ordinance in the manner provided by Section 8-12-4, to enter into such agreements as are necessary to receive assistance as provided in this Division and in applicable provisions of the Illinois Finance Authority Act.

(Source: P.A. 93-205, eff. 1-1-04.)

(65 ILCS 5/8-12-3) (from Ch. 24, par. 8-12-3)

Sec. 8-12-3. As used in this Division:

(1) "Authority" means the "(Name of Financially Distressed City) Financial Advisory Authority".

(2) "Financially distressed city" means a home rule any municipality which is a home rule unit and which (i) is certified and designated by the Department of Revenue as being in the highest 5% of all home rule municipalities in terms of the aggregate of the rate per cent of all taxes levied pursuant to statute or ordinance upon all taxable property of the municipality and as being in the lowest 5% of all home rule municipalities in terms of per capita tax yield, and (ii) is designated by joint resolution of the General Assembly as a financially distressed city under Section 8-12-4.

(3) "Home rule municipality" means a municipality which is a home rule unit as provided in Section 6 of Article VII of the Illinois Constitution.

(4) "Budget" means an annual appropriation ordinance or annual budget as described in Division 2 of Article 8, as from time to time in effect in the financially distressed city.

(5) "Chairperson" means the chairperson of the Authority appointed pursuant to Section 8-12-7.

(6) "Financial Plan" means the financially distressed city's financial plan as developed pursuant to Section 8-12-15, as from time to time in effect.

(7) "Fiscal year" means the fiscal year of the financially distressed city.

(8) "Obligations" means bonds, notes or other evidence of indebtedness issued by the Illinois Finance Authority in connection with the provision of financial aid to a financially distressed city pursuant to this Division and applicable provisions of the Illinois Finance Authority Act.

(Source: P.A. 93-205, eff. 1-1-04.)

(65 ILCS 5/8-12-4) (from Ch. 24, par. 8-12-4)

Sec. 8-12-4. Certification and designation as financially distressed city.

(a) In order to be certified as a financially distressed city and receive assistance as provided in this Division: ,

(1) a home rule municipality shall first, by ordinance passed by its corporate authorities, request (i) that the Department of Revenue certify that it is in the highest 5% of all home rule municipalities in terms of the aggregate of the rate per cent of all taxes levied pursuant to statute or ordinance upon all taxable property of the municipality and in the lowest 5% of all home rule municipalities in terms of per capita tax yield, and (ii) that the General Assembly by joint resolution designate it as a financially distressed city. A home rule municipality which is so certified and designated as a financially distressed city and which desires to receive assistance as provided in this Division shall, by ordinance passed by its corporate authorities, request that a financial advisory authority be appointed for the city and that the city receive assistance as provided in this Division, and shall file a certified copy of that ordinance with the Governor, with the Clerk of the House of Representatives and with the Secretary of the Senate; or .

(2) the State Comptroller may conduct a preliminary review to determine the existence of probable financial stress within a home rule municipality if one or more of the following occur:

(A) the State Comptroller requests that the Department of Revenue certify that the municipality is in the highest 5% of all home rule municipalities in terms of the aggregate of the rate per cent of all taxes levied pursuant to statute or ordinance upon all taxable property of the municipality and in the lowest 5% of all home rule municipalities in terms of per capita tax yield, and the Department certifies the same;

(B) the city council or the mayor of a municipality or school board makes a written request for a preliminary review and that request identifies the existing or anticipated financial conditions or events that make the request necessary;

(C) the State Comptroller receives a written request from a creditor with an undisputed claim against the municipality that exceeds the greater of $10,000 or 1% of the annual general fund budget of the municipality and that remains unpaid 6 months after its due date provided that the creditor notifies the municipality in writing at least 30 days before its request to the State Comptroller of its intention to submit a written request under this paragraph;

(D) the State Comptroller receives, not earlier than 60 days before the next municipal election, a petition containing specific allegations of municipal financial distress signed by at least 25% of the electors within the municipality who voted at the last general election at which a Governor was elected;

(E) the State Comptroller receives written notification that a municipality has not timely deposited its minimum obligation payment to the municipality's pension fund as required by law;

(F) the State Comptroller receives written notification that the municipality has failed for a period of 7 days or more after the scheduled date of payment to pay wages and salaries or other compensation owed to employees or benefits owed to retirees;

(G) the State Comptroller receives written notification from a trustee, paying agent, bondholder, or auditor engaged by the municipality of a default in a bond or note payment or a violation of one or more bond or note covenants;

(H) the State Comptroller receives a resolution from either chamber of the General Assembly requesting a preliminary review;

(I) the municipality is delinquent in the distribution of tax revenues, as required by law, that it has collected for another taxing jurisdiction, and that taxing jurisdiction requests a preliminary review;

(J) the municipality has been assigned a long-term debt rating within or below the BBB category or its equivalent by one or more nationally recognized credit rating agencies; or

(K) the existence of other facts or circumstances that, in the State Comptroller's sole discretion, are indicative of probable financial stress.

Before commencing the preliminary review under this paragraph (2), the State Comptroller shall provide the municipality written notification that he or she intends to conduct a preliminary review. Elected and appointed officials of the municipality shall promptly and fully provide the assistance and information requested by the State Comptroller for that municipality in conducting the preliminary review. The State Comptroller shall provide a preliminary report of his or her findings to the municipality within 20 days after the date the preliminary review begins. A copy of the preliminary report shall be provided to each State Senator and State Representative who represents that municipality. The municipality may provide comments to the State Comptroller concerning the preliminary report within 5 days after the preliminary report is provided to the municipality.

If the State Comptroller believes there is probable financial stress after his or her preliminary review and any input from the municipality, the State Comptroller shall establish a review team under Section 8-12-4.5. A copy of the preliminary report shall be provided to the review team and each State Senator and State Representative who represents that municipality, and the review shall be posted on the State Comptroller's website. The review team shall examine the financial situation of the municipality and complete a final report as provided in Section 8-12-4.5.

If the Governor believes that probable financial stress exists for the municipality to be certified as a financially distressed city under this Section after reviewing a final report prepared under Section 8-12-4.5, the Governor may, by proclamation, certify and designate the municipality as a financially distressed city and authorize appointment of the municipality's Authority under Section 8-12-7. The proclamation shall be filed with the Secretary of State and the corporate authorities of the municipality.

(b) Upon the filing of the certified copies of the that ordinance under paragraph (1) of subsection (a) or upon the written proclamation by the Governor filed with the Secretary of State and corporate authorities of a municipality under paragraph (2) of subsection (a), as required by this Section this Division and all of its provisions shall then and thereafter be applicable to the financially distressed city, shall govern and control its financial accounting, budgeting and taxing procedures and practices, and, subject to the limitations of subsection (a) of Section 8-12-22, shall remain in full force and effect with respect thereto until such time as the financial advisory authority established under Section 8-12-5 is abolished as provided in subsection (c) of Section 8-12-22.

(Source: P.A. 86-1211.)

(65 ILCS 5/8-12-4.5 new)

Sec. 8-12-4.5. Review team powers and duties.

(a) If the State Comptroller believes there is probable financial stress after his or her preliminary review and any input from the municipality under Section 8-12-4, the State Comptroller shall establish a review team for the municipality consisting of: the State Comptroller, or his or her designee; the Director of the Governor's Office of Management and Budget, or his or her designee; a member appointed by the Senate President; a member appointed by the Minority Leader of the Senate; a member appointed by the Speaker of the House of Representatives; and a member appointed by the Minority Leader of the House of Representatives. The State Comptroller may appoint other State officials or other persons with relevant professional experience to serve on the review team. The State Comptroller shall provide administrative support and other support to a review team established under this Section.

(b) In conducting its review, the review team may:

(1) examine the books and records of the municipality;

(2) use the services of other State agencies and employees in conducting the financial review; or

(3) both examine the books and records of the municipality and use the services of other State agencies and employees in conducting the financial review.

The review team shall meet with city council and employees of the municipality as part of its review. At this meeting, the review team shall receive, discuss, and consider information provided by the municipality concerning the financial condition of the municipality. In addition, the review team shall hold at least one public meeting in the jurisdiction of the municipality at which the public may provide comments.

(c) The review team shall submit a written final report of its findings to the State Comptroller within 60 days following its establishment or earlier if required by the State Comptroller. Upon request of a majority of the review team, the State Comptroller may grant one 30-day extension to the 60-day limitation. A copy of the final report shall be forwarded by the State Comptroller to the Governor, mayor and city council of the municipality, the Speaker of the House of Representatives, the Senate President, and each State Senator and State Representative who represents the municipality. The final report shall be posted on the State Comptroller's website within 7 days after the final report is submitted to the Governor. The final report shall identify the existence, or an indication of the likely occurrence, of any of the following if found:

(1) a default in the payment of principal or interest upon bonded obligations, notes, or other municipal securities for which no funds or insufficient funds are on hand and, if required, segregated in a special trust fund;

(2) a failure for a period of 30 days or more beyond the due date to transfer one or more of the following to the appropriate agency:

(i) taxes withheld on the income of employees;

(ii) taxes collected by the municipality as agent for another unit of local government; and

(iii) a contribution required by a pension, retirement, or benefit plan;

(3) a failure for a period of 7 days or more after the scheduled date of payment to pay wages and salaries or other compensation owed to employees or benefits owed to retirees;

(4) the total amount of accounts payable for the current fiscal year, as determined by the State Comptroller, is in excess of 10% of the total expenditures of the municipality in that fiscal year;

(5) a failure to eliminate an existing deficit in any fund of the municipality within the 2-year period preceding the end of the municipality's fiscal year during which the review team final report is received;

(6) a projection of a deficit in the general fund of the municipality for the current fiscal year in excess of 5% of the budgeted revenues for the general fund;

(7) a failure to comply in all material respects with the terms of an approved deficit elimination plan or an agreement entered into pursuant to a deficit elimination plan;

(8) the existence of material loans to the general fund from other municipal funds that are not regularly settled between the funds or that are increasing in scope;

(9) the existence after the close of the fiscal year of material recurring, non-budgeted subsidies from the general fund to other major funds;

(10) the existence of a structural operating deficit;

(11) the use of restricted revenues for purposes not authorized by law;

(12) the likelihood that the municipality is or will be unable to pay its obligations within 60 days after the date of the review team's final report; and

(13) any other facts and circumstances indicative of a municipal financial emergency.

(d) The review team shall include one of the following conclusions in its final report:

(1) a financial emergency does not exist within the municipality; or

(2) a financial emergency exists within the municipality.

(e) The review team may, with the approval of the State Comptroller, appoint an individual or firm to carry out the review and submit a report to the review team for approval. The State Comptroller may enter into a contract with an individual or firm respecting the terms and conditions of the appointment.

(f) For purposes of this Section:

(1) A financial emergency does not exist within a municipality if the final report concludes that none of the factors in subsection (c) exist or are likely to occur within the current or next fiscal year or, if they occur, do not threaten the municipality's capability to provide necessary governmental services essential to public health, safety, and welfare.

(2) A financial emergency exists within a municipality if any of the following occur:

(A) the final report concludes that one or more of the factors in subsection (c) exist or are likely to occur within the current or next fiscal year and threaten the municipality's current and future capability to provide necessary governmental services essential to the public health, safety, and welfare;

(B) the municipality has failed to provide timely and accurate information enabling the review team to complete its final report; or

(C) the mayor of the municipality concludes in writing to the review team that one or more of the factors in subsection (c) exist or are likely to occur within the current or next fiscal year and threaten the municipality's current and future capability to provide necessary governmental services essential to the public health, safety, and welfare, and the mayor recommends that a financial emergency be declared and the State Comptroller concurs with the recommendation.

(65 ILCS 5/8-12-10.5 new)

Sec. 8-12-10.5. State grants. If a financially distressed city or Authority is awarded a State grant, any moneys the financially distressed city or Authority would be required to match under the grant are waived unless the moneys under the grant come from federal moneys that require the match. A municipality's status as a financially distressed city may not negatively impact a decision of whether or not to award a State grant to the municipality or negatively impact the amount of moneys received by the municipality from a State grant.

(65 ILCS 5/8-12-21.5 new)

Sec. 8-12-21.5. Noncompliance by corporate authorities or employees of a municipality. If a financially distressed city, including its corporate authorities or employees, materially violates the requirements of this Division, the Authority may commence action in the circuit court within any county in which the municipality is located if the Authority has given the corporate authorities of the city written notice that includes: a detailed explanation of the material violation; a statement of the Authority's intention to enforce the provisions of this Division by commencing an action; a statement giving the corporate authorities at least 15 days to correct the violation before the Authority may commence an action.

(65 ILCS 5/8-12-23) (from Ch. 24, par. 8-12-23)

Sec. 8-12-23. A financially distressed city to which this Division applies shall remain subject to all other applicable provisions of law this Act, except as limited by this Division; provided, however, that in case of a conflict between the provisions of this Division and any other provision of law this Act, the provisions of this Division shall control.

(Source: P.A. 86-1211.)