Substitute House Bill No. 6711
Public Act No. 99-182
An Act Concerning Municipal Pension Deficit Funding Bonds.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. (NEW) (a) For purposes of this section:
(1) "Actuarial valuation" means a determination certified by an enrolled actuary, in a method and using assumptions meeting the parameters established by generally accepted accounting principles, of the normal cost, actuarial accrued liability, actuarial value of assets and related actuarial present values for a pension plan of a municipality as of a valuation date not more than thirty months preceding the date of issue of the pension deficit funding bonds, together with an actuarial update of such valuation as of a date not more than three months preceding the date of notification of the secretary by the municipality, in accordance with subdivision (1) of subsection (c) of this section, of its intent to issue the pension deficit funding bonds.
(2) "Actuarially recommended contribution" means the lesser of the annual employer normal cost or the recommended annual required contribution to the pension plan of the municipality, each of which is established by the actuarial valuation and determined by an enrolled actuary in a method and using assumptions meeting the parameters established by generally accepted accounting principles provided such contribution shall, in a time and manner to be prescribed by regulations adopted by the secretary, in consultation with the Treasurer, be at least equal to the amount necessary to maintain the pension plan's funding ratio substantially the same as immediately succeeding the deposit of the proceeds of the pension deficit funding bonds in such pension plan.
(3) "Chief executive officer" means such officer as described in section 7-193 of the general statutes.
(4) "Enrolled actuary" means a person who is enrolled by the Joint Board for the Enrollment of Actuaries established under subtitle C of title III of the Employee Retirement Income Security Act of 1974, as from time to time amended.
(5) "General obligation" means an obligation issued by a municipality and secured by the full faith and credit and taxing power of such municipality.
(6) "Municipal Finance Advisory Commission" means the Municipal Finance Advisory Commission established pursuant to section 7-394b of the general statutes.
(7) "Municipality" means a municipality, as defined in section 7-369 of the general statutes.
(8) "Obligation" means any bond or any other transaction which constitutes debt in accordance with both municipal reporting standards in section 7-394a of the general statutes and the regulations prescribing municipal financial reporting adopted by the secretary pursuant to said section 7-394a.
(9) "Pension deficit funding bond" means any obligation issued by a municipality to fund, in whole or in part, an unfunded past benefit obligation. "Pension deficit funding bond" shall not include any bond issued by a municipality pursuant to and in accordance with the provisions of subsection (g) of this section to pay, fund or refund prior to maturity any of its pension deficit funding bonds previously issued, or any bond issued prior to January 1, 1999, but may include any bond issued by a municipality prior to January 1, 1999, for the sole and exclusive purposes of (A) applying the provisions of subsection (f) of this section in lieu of subsection (c) of section 7-403a of the general statutes as the municipality may determine, and (B) requiring the municipality to apply and comply with the provisions of subsections (c) and (d) of this section.
(10) "Secretary" means the Secretary of the Office of Policy and Management or the secretary's designee.
(11) "Treasurer" means the Treasurer of the state of Connecticut or the Treasurer's designee.
(12) "Unfunded past benefit obligation" means the unfunded actuarial accrued liability of the pension plan determined in a method and using assumptions meeting the parameters established by generally accepted accounting principles.
(13) "Weighted average maturity" means (A) the sum of the products, determined separately for each maturity or sinking fund payment date and taking into account any mandatory redemptions of the obligation, of (i) with respect to a serial obligation, the principal amount of each serial maturity of such obligation and the number of years to such maturity, or (ii) with respect to a term obligation, the dollar amount of each mandatory sinking fund payment with respect to such obligation and the number of years to such payment, divided by (B) the aggregate principal amount of such obligation.
(b) Except as expressly provided in this section, no municipality shall issue any pension deficit funding bond.
(c) Any municipality which has no outstanding pension deficit funding bonds, other than an earlier series of such obligations issued under this act to partially fund an unfunded past pension obligation, may authorize and issue pension deficit funding bonds to fund all or a portion of an unfunded past benefit obligation, as determined by an actuarial valuation, and the payment of costs related to the issuance of such bonds in accordance with the following requirements.
(1) The municipality shall, within the time and in the manner prescribed by regulations adopted by the secretary or as otherwise required by the secretary, notify the secretary of its intent to issue such pension deficit funding bonds and shall include with such notice (A) the actuarial valuation, (B) an actuarial analysis of the method by which the municipality proposes to fund any unfunded past benefit obligation not to be defrayed by the pension deficit funding bonds, which method may include a plan of issuance of a series of pension deficit funding bonds, (C) an explanation of the municipality's investment strategic plan for the pension plan with respect to which the pension deficit funding bonds are to be issued, including, but not limited to, an asset allocation plan, (D) a three-year financial plan, including the plan of finance for such pension deficit funding bonds, prepared in the manner prescribed by the secretary, (E) documentation of the municipality's authorization of the issuance of such pension deficit funding bonds, and (F) such other information and documentation, as defined in regulations, as is required by the secretary or the Treasurer to carry out the provisions of this section.
(2) So long as the pension deficit funding bonds or any bond refunding such bonds are outstanding, the municipality shall (A) meet any actuarially recommended contribution in each fiscal year of the municipality commencing with the fiscal year in which the bonds are issued, and (B) notify the secretary annually, who shall in turn notify the Treasurer, of the amount and the rate of any such actuarially recommended contribution and the amount and the rate, if any, of the actual annual contribution by the municipality to the pension plan to meet such actuarially recommended contribution.
(3) The municipality shall not issue pension deficit funding bonds prior to, nor more than six months subsequent to, receipt of the written final review required under subsection (d) of this section. A municipality may renotify the secretary of its intention to issue pension deficit funding bonds and provide the secretary with updated information and documentation in the manner and as described in subdivision (1) of this subsection, and request an updated final review from the secretary if more than six months will elapse between the receipt of the prior final review of the secretary and the proposed date of issue of the pension deficit funding bonds.
(d) Upon receipt of notification from a municipality that it intends to issue pension deficit funding bonds, the secretary shall inform the Treasurer and the Municipal Finance Advisory Commission of such notification. The secretary and the treasurer shall review the information and documentation required in subsection (c) of this section and within 15 days shall notify the municipality as to the adequacy of the materials provided and whether any additional information is required. The secretary and the Treasurer shall issue a written final review to the municipality verifying that the municipality has complied with the provisions of subdivision (1) of subsection (c) of this section and, including any recommendations to the municipality concerning the issuance of pension deficit funding bonds, not later than thirty days following the receipt of such information and documentation. The secretary shall file a copy of such final review with the chief executive officer of the municipality and the Municipal Finance Advisory Commission. If the secretary and the Treasurer fail to provide a written final review to the municipality by the forty-fifth day following the receipt of such information and documentation, such final review shall be deemed to have been received by the municipality.
(e) Except as otherwise provided by this section, the provisions and limitations of chapter 109 of the general statutes shall apply to any pension deficit funding bonds issued pursuant to the provisions of this section. Such pension deficit funding bonds shall be general obligations of the municipality, and shall be serial bonds maturing in annual or semiannual instalments of principal, or shall be term bonds with mandatory annual or semiannual deposits of sinking fund payments into a sinking fund. Notwithstanding the provisions of any other general statute or of any special act, charter, special act charter, home-rule ordinance, local ordinance or local law, (1) the first instalment of any series of pension deficit funding bonds shall mature or the first sinking fund payment of any series of pension deficit funding bonds shall be due not later than eighteen months from the date of the issue of such series, provided that such first instalment shall mature or such first sinking fund payment shall be due not later than the fiscal year of the municipality next following the fiscal year in which such series is issued, and the last instalment of such series shall mature or the last sinking fund payment of such series shall be due not later than thirty years from such date of issue, (2) any such pension deficit funding bonds may be sold at public sale on sealed proposal, by negotiation or by private placement in such manner at such price or prices, at such time or times and on such terms or conditions as the municipality, or the officers or board of the municipality delegated the authority to issue such bonds, determines to be in the best interest of the municipality, and (3) no municipality shall issue temporary notes in anticipation of the receipt of the proceeds from the sale of its pension deficit funding bonds.
(f) Proceeds of the pension deficit funding bonds, to the extent not applied to the payment of costs related to the issuance thereof, shall be deposited in the pension plan of the municipality to fund the unfunded past benefit obligation for which the bonds were issued, and, notwithstanding any limitations on the investment of proceeds received from the sale of bonds, notes or other obligations set forth in section 7-400 of the general statutes, may be invested in accordance with the terms of said pension plan, as such terms may be amended from time to time.
(g) A municipality may authorize and issue refunding bonds to pay, fund or refund prior to maturity any of its pension deficit funding bonds in accordance with the provisions of section 7-370c of the general statutes, provided, notwithstanding the provisions of said section 7-370c, the weighted average maturity of such refunding bonds shall not exceed the weighted average maturity of the outstanding pension deficit funding bonds being paid, funded or refunded by such refunding bonds. The municipality shall notify the secretary, who shall in turn notify the Treasurer, of its intention to issue refunding bonds pursuant to this subsection, not less than fifteen days prior to the issuance thereof, and shall provide the secretary with a copy of the final official statement, if any, prepared for the refunding bonds, not more than fifteen days after the date of issue of such bonds.
(h) The secretary, in consultation with the Treasurer, shall adopt regulations, in accordance with the provisions of chapter 54 of the general statutes, as necessary to establish guidelines concerning compliance with the provisions of subsections (c), (d) and (g) of this section.
Sec. 2. Section 7-374 of the general statutes is repealed and the following is substituted in lieu thereof:
(a) As used in this section, "town" includes each town, consolidated town and city and consolidated town and borough; "municipality" excludes each town and includes each other independent and dependent political and territorial division and subdivision.
(b) No town and no municipality coterminous with or within such town shall incur any indebtedness in any of the following classes through the issuance of bonds which will cause the aggregate indebtedness, in that class, of such town and of all municipalities coterminous with and within such town, jointly, to exceed the multiple stated below for each class times the aggregate annual receipts of such town and of all municipalities coterminous with and within such town, jointly, from taxation for the most recent fiscal year next preceding the date of issue: (1) All debt other than debt for urban renewal projects, water pollution control projects, [and] school building projects, as defined in section 10-289, and the funding of an unfunded past benefit obligation, as defined in section 1 of this act, two and one-quarter; (2) debt for urban renewal projects, three and one-quarter; (3) debt for water pollution control projects, three and three-quarters; (4) debt for school building projects, as defined in section 10-289, four and one-half; (5) debt for the funding of an unfunded past benefit obligation, as defined in section 1 of this act, three; and (6) total debt including subdivisions (1), (2), (3), [and] (4) and (5) of this subsection, seven. In the computation of annual receipts from taxation, there shall be included as such receipts interest, penalties, late payment of taxes and payments made by the state to such town and to municipalities coterminous with and within such town under section 12-129d and section 7-528. In computing such aggregate indebtedness, there shall be excluded each bond, note and other evidence of indebtedness (i) issued in anticipation of taxes (ii) issued for the supply of water, for the supply of gas, for the supply of electricity, for the construction of subways for cables, wires and pipes, for the construction of underground conduits for cables, wires and pipes and for two or more of such purposes; (iii) issued in anticipation of the receipt of proceeds from assessments which have been levied upon property benefited by any public improvement; (iv) issued in anticipation of the receipt of proceeds from any state or federal grant for which the town or municipality has received a written commitment or for which an allocation has been approved by the State Bond Commission or from a contract with the state, a state agency or another municipality providing for the reimbursement of capital costs but only to the extent such indebtedness can be paid from such proceeds; (v) issued for water pollution control projects in order to meet the requirements of an abatement order of the Commissioner of Environmental Protection, provided the municipality files a certificate signed by its chief fiscal officer with the commissioner demonstrating to the satisfaction of the commissioner that the municipality has a plan for levying a system of charges, assessments or other revenues which are sufficient, together with other available funds of the municipality, to repay such obligations as the same become due and payable; and (vi) upon placement in escrow of the proceeds of refunding bonds, notes or other obligations or other funds of the municipality in an amount sufficient, together with such investment earnings thereon as are to be retained in said escrow, to provide for the payment when due of the principal of and interest on such bond, note or other evidence of indebtedness. "Urban renewal project", as used in this section, shall include any project authorized under title 8, the bonds for which are not otherwise, by general statute or special act, excluded from the computation of aggregate indebtedness or borrowing capacity. In the case of a town that is a member of a regional school district, a portion of the aggregate indebtedness of such regional school district shall be included in the aggregate indebtedness of such town for school building projects for the purposes of this section. Such portion shall be determined by applying to the indebtedness of the district, other than indebtedness issued in anticipation of the receipt by the district of payments by its member towns or the state for the operations of such district's schools, such member town's percentage share of the net expenses of such district for the most recent fiscal year next preceding the date of issue payable by such town as determined in accordance with subsection (b) of section 10-51.
Sec. 3. This act shall take effect from its passage.
Approved June 23, 1999TOP