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HOUSE BILL No. 5575

May 8, 2014, Introduced by Reps. Durhal and Walsh and referred to the Committee on
Detroit's Recovery and Michigan's Future.

A bill to create the Michigan settlement administration

authority; to provide for the operation of the authority; to create

certain funds; to authorize the resolution of certain potential

claims against the state; and to prescribe the powers and duties of

the authority and certain other state officials and state

employees.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 1. This act shall be known and may be cited as the 1

"Michigan settlement administration authority act". 2

Sec. 2. The legislature finds and declares the following: 3

(a) As part of a municipal bankruptcy case involving a 4

qualified city, the city's retirement systems and certain of their 5

members have asserted that this state may be obligated to pay any 6

deficiencies in pension benefits payable to retirees, an assertion 7


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that this state disputes. 1

(b) To settle a portion of a municipal bankruptcy case and if 2

certain conditions are satisfied, this state shall make a 3

contribution to reduce deficiencies in pension benefits of certain 4

members of certain retirement systems, in order to avoid additional 5

ongoing and future litigation and to partially settle the case, in 6

return for, among other things, full releases from any claims 7

against this state for alleged deficiencies in pension benefits. 8

(c) Partial settlement of the case and this state's 9

contribution in support serves important public purposes and will 10

be beneficial to the entire state due to 1 or more of the 11

following: 12

(i) It will enhance the retirement income for many qualified 13

city retirees, some of whom reside or will reside in other parts of 14

this state, and reduce the likelihood of their seeking public 15

assistance. 16

(ii) It will facilitate prompt resolution of certain municipal 17

bankruptcy cases and save taxpayers ongoing litigation costs. 18

(iii) It will protect this state and its taxpayers from 19

potential claims from parties associated with the retirement 20

systems of a qualified city. 21

(d) Establishing the authority and execution by the authority 22

of its powers granted under this act fulfill in all respects a 23

public and governmental purpose for the benefit of the people of 24

this state. 25

Sec. 3. As used in this act: 26

(a) "Authority" means the Michigan settlement administration 27


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authority created under section 4. 1

(b) "Board" means the board of directors of the authority. 2

(c) "Contribution agreement" means the contribution agreement 3

in substantially the form included with a qualified city's plan for 4

adjustment. 5

(d) "Countercyclical budget and economic stabilization fund" 6

means the countercyclical budget and economic stabilization fund 7

created in section 351 of the management and budget act, 1984 PA 8

431, MCL 18.1351. 9

(e) "Operating expenses" means the reasonable operating 10

expenses of the authority, including without limitation the cost of 11

preparation of accounting and other reports, costs of authority 12

meetings or other required activities of the authority, counsel 13

fees, including fees of the attorney general, and fees and expenses 14

incurred for consultants and fiduciaries and any other costs 15

authorized in this act. 16

(f) "Person" means an individual, corporation, limited or 17

general partnership, association, joint venture, limited liability 18

company, or a governmental entity, including this state. 19

(g) "Plan for adjustment" means the final plan for adjustment 20

filed by a qualified city in a bankruptcy proceeding. 21

(h) "Qualified beneficiaries" means members of the retirement 22

systems and any beneficiaries of the retirees who are entitled to 23

all or part of a member's retirement benefit. 24

(i) "Qualified city" means a city with a plan for adjustment 25

and with a population of more than 600,000 that has a retirement 26

system for members who retire with years of service as an employee 27


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of that city. 1

(j) "Retirement systems" means the police and fire retirement 2

system of a qualified city and the general retirement system of a 3

qualified city. 4

(k) "Settlement administration fund" or "fund" means the 5

settlement administration fund created in section 8. 6

(l) "State treasurer" means the state treasurer of this state 7

or his or her designee who is designated by a written instrument 8

signed by the state treasurer and maintained in a permanent file 9

and whose signature has the same force and effect as the signature 10

of the state treasurer for all purposes under this act. 11

Sec. 4. The Michigan settlement administration authority is 12

created as a public body corporate and politic within the 13

department of treasury. The authority is a state institution within 14

the meaning of section 9 of article II of the state constitution of 15

1963 and an instrumentality of this state exercising public and 16

essential governmental functions. The exercise by the authority of 17

the powers conferred by this act is an essential governmental 18

function of this state. 19

Sec. 5. The authority shall exercise its duties independently 20

of the state treasurer. Any administrative functions of the 21

authority shall be performed under the direction and supervision of 22

the state treasurer. 23

Sec. 6. (1) The authority shall exercise its duties through 24

its board of directors. 25

(2) The board shall consist of 5 members as follows: 26

(a) The state treasurer. 27


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(b) The director of the department of licensing and regulatory 1

affairs. 2

(c) One member appointed by the governor with the advice and 3

consent of the senate, who has knowledge, skill, or experience in 4

the legal field of bankruptcy. 5

(d) One member appointed by the governor from a list of 2 or 6

more individuals nominated by the speaker of the house of 7

representatives who have knowledge, skill, or experience in the 8

field of bankruptcy, finance, accounting, or other relevant field. 9

(e) One member appointed by the governor from a list of 2 or 10

more individuals nominated by the senate majority leader who have 11

knowledge, skill, or experience in the field of bankruptcy, 12

finance, accounting, or other relevant field. 13

(3) The appointed members shall serve for a term of 1 year. 14

The appointed members shall serve until a successor is appointed. A 15

vacancy shall be filled for the balance of the unexpired term in 16

the same manner as the original appointment. 17

(4) The state treasurer or director of the department of 18

licensing and regulatory affairs may appoint a representative to 19

serve in his or her absence. 20

(5) Members of the board shall serve without compensation but 21

may receive reasonable reimbursement for necessary travel and 22

expenses incurred in the discharge of their duties. 23

(6) The state treasurer shall serve as chairperson of the 24

board. 25

(7) A majority of the appointed and serving members of the 26

board shall constitute a quorum of the board for the transaction of 27


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business. A member may participate in a meeting by the use of 1

amplified telephonic or video conferencing equipment. A member 2

participating by the use of video conferencing equipment shall be 3

considered to be present for purposes of a quorum and for purposes 4

of voting. Actions of the board shall be approved by a majority 5

vote of the members present at a meeting. 6

(8) In fulfilling its duties under this act, the authority may 7

seek legal counsel from the state attorney general or financial 8

expertise from the state treasurer. If it is unable to obtain 9

necessary assistance from the state attorney general or state 10

treasurer, then the authority may contract for the services of 11

legal counsel, financial expert, or other expert advice. 12

(9) The members of the board and any agent of the authority 13

are subject to 1968 PA 317, MCL 15.321 to 15.330, and 1968 PA 318, 14

MCL 15.301 to 15.310. 15

(10) A member of the board or agent of the authority shall 16

discharge the duties of his or her position in a nonpartisan 17

manner, with good faith, and with that degree of diligence, care, 18

and skill that an ordinarily prudent person would exercise under 19

similar circumstances in a like position. In discharging the 20

duties, a member of the board or agent of the authority, when 21

acting in good faith, may rely upon the opinion of legal counsel or 22

other expert advice. 23

Sec. 7. The authority shall have all of the following powers: 24

(a) To make and amend bylaws. 25

(b) To sue and be sued, to have a seal, and to make, execute, 26

and deliver contracts, conveyances, and other instruments necessary 27


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to the exercise of the authority's powers. 1

(c) To make and execute contracts including without limitation 2

the contribution agreement, trust agreements, and escrow 3

agreements, and all other instruments necessary or convenient for 4

the exercise of its powers and functions, and commence any action 5

to protect or enforce any right conferred upon it by any law, 6

contract, or other agreement. 7

(d) To engage the services of legal counsel or other advisors, 8

consultants, and fiduciaries as necessary to effectuate the 9

purposes of this act. 10

(e) To pay its operating expenses. 11

Sec. 8. (1) The settlement administration fund is created 12

within the state treasury. 13

(2) The state treasurer may receive money or other assets from 14

any source for deposit into the fund. The state treasurer shall 15

direct the investment of the fund. The state treasurer shall credit 16

to the fund interest and earnings from fund investments. 17

(3) Money in the fund at the close of the fiscal year shall 18

remain in the fund and shall not lapse to the general fund. 19

(4) The authority shall expend money from the fund only as 20

provided in this act. 21

Sec. 9. (1) The authority shall either disburse the money in 22

the fund to the retirement systems or return the money to the 23

countercyclical budget and economic stabilization fund as set forth 24

in this section. 25

(2) The authority shall cause $194,800,000.00 to be paid to 26

the retirement systems for the benefit of qualified beneficiaries 27


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if and only if the authority determines in writing that both of the 1

following conditions have been satisfied: 2

(a) The bankruptcy court has entered an order approving a plan 3

for adjustment for a qualified city. 4

(b) The terms and conditions of the contribution agreement 5

have been satisfied. 6

(3) If the authority determines in writing that at least 1 of 7

the conditions in subsection (2) has not been satisfied, then the 8

money in the fund shall be returned to the countercyclical budget 9

and economic stabilization fund. 10

(4) If the authority has failed to make a finding in writing 11

under subsection (2) or (3) by May 1 immediately following the 12

approval of the plan for adjustment, then the money in the fund 13

shall be returned to the countercyclical budget and economic 14

stabilization fund. 15

Sec. 10. (1) If the authority causes $194,800,000.00 to be 16

paid to the retirement systems for the benefit of qualified 17

beneficiaries, then the state treasurer shall determine whether 18

there is substantial compliance with the conditions and 19

requirements of the settlement of pension claims set forth in the 20

contribution agreement, the plan for adjustment, and any order of 21

the bankruptcy court. 22

(2) The money received by the retirement systems shall be 23

utilized to enhance the retirement benefits of certain qualified 24

beneficiaries. 25

(3) The state treasurer shall submit a report to the governor 26

and both houses of the legislature on whether there is substantial 27


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compliance with the conditions and requirements of the settlement 1

of pension claims as provided in the contribution agreement. The 2

state treasurer shall submit the report annually beginning 3

September 1 immediately following the payment of the money to the 4

retirement systems and ending 20 years thereafter. 5

Sec. 11. It is determined that the creation of the authority, 6

the appropriation made to the authority, and the carrying out of 7

the authority's authorized purposes are in all respects a public 8

and governmental purpose for the benefit of the people of this 9

state and for the improvement of their health, safety, welfare, 10

comfort, and security, and that these purposes are public purposes, 11

and that the authority will be performing an essential governmental 12

function in the exercise of the powers conferred upon it by this 13

act. 14

Sec. 12. The obligation to make this state's contribution 15

described in the contribution agreement is not a general obligation 16

or indebtedness of this state or the authority and is subject to 17

the satisfaction of the conditions described in the contribution 18

agreement, the plan for adjustment, and the order of a bankruptcy 19

court. 20

Sec. 13. (1) This state, a state official or state-related 21

entity, as defined in the plan for adjustment, the state treasurer, 22

the authority, a board member, an agent of the authority, and any 23

other legal, financial, or other expert providing advice to the 24

authority does not have any liability or obligation arising from or 25

related to the contributions or funding of the retirement systems, 26

except for the authority's disbursement or return of funds as 27


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provided in section 9. 1

(2) This state, a state official or state-related entity, as 2

defined in the plan for adjustment, the state treasurer, the 3

authority, a board member, an agent of the authority, and any other 4

legal, financial, or other expert providing advice to the authority 5

does not have any liability for the representations, warranties, 6

covenants, determinations, agreements, or other obligations of this 7

state or the authority, or under any of the certificates, notices, 8

or agreements delivered pursuant to the contribution agreement, the 9

plan for adjustment, or the order of a bankruptcy court confirming 10

the plan for adjustment. 11

Sec. 14. Any action or proceeding related to the duties and 12

obligations or otherwise arising under this act or with respect to 13

the contribution agreement or the plan for adjustment shall be 14

brought in the bankruptcy court that approved the plan for 15

adjustment. However, if the bankruptcy court determines it does not 16

have jurisdiction, an action or proceeding described in this 17

section shall be brought in the court of claims, which court shall 18

have exclusive jurisdiction. 19