General Assembly Raised Bill No. 337
February Session, 2010 LCO No. 1689
*01689_______PD_*
Referred to Committee on Planning and Development
Introduced by:
(PD )
General Assembly
Raised Bill No. 337
February Session, 2010
LCO No. 1689
*01689_______PD_*
Referred to Committee on Planning and Development
Introduced by:
(PD )
AN ACT CONCERNING MUNICIPAL POSTEMPLOYMENT BENEFIT FUNDING BONDS.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. (NEW) (Effective October 1, 2010) As used in sections 1 to 3, inclusive, of this act:
(l) "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 postemployment benefit plan of a municipality as of a valuation date not more than thirty months preceding the date of issue of the postemployment benefit funding bonds.
(2) "Actuarially recommended contribution" means the lesser of the annual employer normal cost or the annual required contribution of the municipal employer to the postemployment benefit plan of the municipality, as 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 be at least equal to the amount actuarially determined necessary to maintain the postemployment benefit plan's funding ratio in substantially the same proportion as the one immediately succeeding the deposit of the proceeds of the postemployment benefit funding bonds in such postemployment benefit plan.
(3) "Municipality" has the same meaning as in section 7-369 of the general statutes.
(4) "Obligation" means any bond or any other transaction that 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 of the Office of Policy and Management pursuant to section 7-394a of the general statutes.
(5) "Postemployment benefits" means any and all postemployment benefits other than pensions, including, but not limited to, medical, dental, vision, disability and life insurance provided to individuals who have terminated their service with the municipality, and the beneficiaries of such individuals.
(6) "Postemployment benefit board" means any board or commission established by the municipality to administer the assets of the postemployment benefit trust.
(7) "Postemployment benefit funding bond" or "bonds" means any obligations issued by a municipality to fund postemployment benefits under sections 1 to 3, inclusive, of this act.
(8) "Treasurer" means the State Treasurer or the Treasurer's designee.
(9) "Unfunded past benefit obligation" means the unfunded actuarial accrued liability of the postemployment benefit plan determined in a method and using assumptions meeting the parameters established by generally accepted accounting principles.
(10) "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.
Sec. 2. (NEW) (Effective October 1, 2010) (a) Any municipality may, by ordinance or by resolution adopted by a majority vote of the members of its legislative body, establish one or more trusts for the purposes of accumulating and investing assets to fund postemployment benefit systems for its officers and employees and their beneficiaries, as described in subsection (a) of section 7-450 of the general statutes.
(b) Notwithstanding any provision of the general statutes or of any special act, charter, special act charter, home-rule ordinance, local ordinance or other local law, any municipality that establishes a trust for postemployment benefits pursuant to this section may provide for the management and investment of such system and any such trust, including the designation of an existing postemployment benefit board for such purposes or the establishment of a postemployment benefit board. Any postemployment benefit board serving as trustee of such a trust shall manage and invest the assets of that trust and may retain the services of an investment manager. Notwithstanding any limitations on the investment of municipal funds set forth in section 7-400 of the general statutes, funds held in any such trust may be invested in accordance with the terms of the postemployment benefit plan, as such terms may be amended from time to time. The investment and management of the assets of any such trust shall be in compliance with the prudent investor rule as set forth in sections 45a-541 to 45a-541l, inclusive, of the general statutes.
(c) Any municipality that establishes a trust for postemployment benefits pursuant to this section shall maintain records of all its proceedings, make such records available for inspection and provide the Treasurer and the legislative body that created it an annual report on the fund's performance and financial status.
(d) Notwithstanding any provision of the general statutes or of any special act, charter, special act charter, home-rule ordinance, local ordinance or other local law, any trust established to pay postemployment benefits shall be irrevocable and solely used to provide benefits to retirees and beneficiaries in accordance with the terms of the plans or programs providing postemployment benefits. The assets of any trust for postemployment benefits shall be exempt from state and local taxation, and the assets of any such trust shall not be subject to execution, attachment, garnishment or any other process.
(e) Any municipality may enter into intergovernmental agreements for the collective administration of any trust established for the purpose of accumulating and investing assets to fund postemployment benefits.
(f) The provisions of this section shall not operate to invalidate the establishment by any municipality, pursuant to the provisions of any public or special act, charter, special act charter, home-rule ordinance, local ordinance or local law, of any postemployment benefit system or of any trust duly established prior to the effective date of this section. Any such trust duly established prior to the effective date of this section shall be considered a valid trust for the purposes of funding postemployment benefits under this section.
Sec. 3. (NEW) (Effective October 1, 2010) (a) Notwithstanding any provision of the general statutes or of any special act, charter, special act charter, home-rule ordinance, local ordinance or other local law, any municipality that has established a trust pursuant to section 2 of this act may, by resolution adopted by majority vote of the members of its legislative body, authorize the issuance of postemployment benefit funding bonds or any series of postemployment benefit funding bonds to fund postemployment benefits, as determined by an actuarial valuation, and the payment of costs related to the issuance of such bonds. Any municipality having an elected board of finance, or an equivalent body exercising the powers of such a board generally, shall require a referral of the bond resolution to such body for its recommendation, provided that a negative recommendation by such board shall require a two-thirds vote of the legislative body for approval of the bond resolution. The issuance of any bonds or series of bonds pursuant to sections 1 to 3, inclusive, of this act shall be subject to the requirements set forth in subsections (b) to (i), inclusive, of this section.
(b) The net proceeds of any bonds, after deducting costs of issuance, shall be deposited upon receipt into a trust established pursuant to section 2 of this act.
(c) The aggregate principal amount of any bonds and the aggregate stated initial value of any bonds issued pursuant to subsection (a) of this section shall not on a cumulative basis exceed eighty-five per cent of current unfunded actuarial liabilities of such issuing municipality.
(d) For purposes of determining the limitation of indebtedness of the municipality under section 7-374 of the general statutes, the aggregate principal amount of any bonds and the aggregate stated initial value of any bonds issued pursuant to sections 1 to 3, inclusive, of this act shall be included in the debt described in subdivision (5) of subsection (b) of section 7-374 of the general statutes.
(e) A municipality may authorize and issue refunding bonds to pay, fund or refund prior to maturity any of its postemployment benefit funding bonds or series of bonds in accordance with the provisions of section 7-370c of the general statutes or, with respect to a regional school district, the provisions of section 10-60a of the general statutes, provided the weighted average maturity of such refunding bonds shall not exceed the weighted average maturity of the outstanding postemployment benefit funding bonds being paid, funded or refunded by such refunding bonds.
(f) Bonds authorized under this section shall be general obligations of the municipality and may be issued as serial bonds maturing in annual or semiannual installments of principal, as term bonds with mandatory annual or semiannual deposits of sinking fund payments into a sinking fund, or as capital appreciation bonds having stated initial values and total maturity amounts in each year. Notwithstanding any provision of the general statutes or of any special act, charter, special act charter, home-rule ordinance, local ordinance or local law, (1) the first installment of any series of bonds shall mature or the first sinking fund payment of any series of bonds or the first maturity amount of any capital appreciation bonds shall be due not later than the date forty-eight months from the date of the issue of such series, and the last installment of such series shall mature or the last sinking fund payment or maturity amount shall be due not later than the date thirty years from the date of issue, and (2) any such series of bonds may be sold at public sale on sealed proposals, by negotiation or by private placement in such manner, at such price or prices, at such time or times and on such terms, details and particulars as the officers or board of the municipality delegated the authority to issue such bonds determine to be in the best interest of the municipality. The amortization schedule of any bonds, the date, interest rates and mandatory or optional redemption provisions shall be determined by the officers or board delegated the authority to issue such bonds.
(g) The bonds or any series thereof may be issued and sold as variable rate bonds or as fixed rate bonds. If issued as variable rate bonds, the municipality may obtain standby bond purchase agreements, letters of credit, lines of credit, financial guaranty insurance policies, surety agreements or any similar agreements and remarketing agreements with one or more financial institutions to provide for additional security for and the purchase upon tender of the variable rate bonds. Interest rates on variable rate bonds shall be determined by such remarketing agents, investment banking firms or other financial institutions as the officials or board delegated the authority to issue the bonds shall appoint.
(h) Whenever the municipality has authorized the issuance of bonds under the provisions of this section, it may authorize the issuance of temporary notes in anticipation of the receipt of the proceeds from the sale of such bonds. The amount of such notes may equal but not exceed the amount of such bonds. Such notes shall be issued for a period of not more than two years, but notes issued for a shorter period of time may be renewed by the issue of other notes, provided the period from the date of the original notes to the maturity of the last notes issued in renewal thereof shall comply with the requirements of section 7-378a of the general statutes. The officials or board delegated the authority to issue the notes shall determine the date, maturity, interest rate, form, manner of sale and other details of such notes. Such notes may bear interest or be sold at a discount. The interest or discount on such notes, including renewals thereof, and the expense of preparing, issuing and marketing them may be included as a part of the cost of the unfunded past benefit obligation of postemployment benefits being financed and may either be borrowed temporarily under the provisions of this section or permanently funded by the issue of bonds, notes or other obligations under the provisions of this section. Upon the sale of such bonds, the proceeds thereof, to the extent required, shall be applied forthwith to the payment of the principal and interest of all notes issued in anticipation thereof or shall be deposited in trust for such purpose with a bank or trust company, which may be the bank or trust company, if any, at which such notes are payable.
(i) In connection with or incidental to the issuance, pursuant to this section, of bonds or any series thereof or temporary notes, the municipality may authorize the execution of reimbursement agreements, remarketing agreements, standby bond purchase agreements, interest rate swap agreements and any other necessary or appropriate agreements pursuant to the requirements of section 7-370b of the general statutes.
(j) In addition to the powers specifically granted in this section, a municipality is authorized to do all things necessary to carry out the purposes of this section.
This act shall take effect as follows and shall amend the following sections:
Section 1 October 1, 2010 New section
Sec. 2 October 1, 2010 New section
Sec. 3 October 1, 2010 New section
This act shall take effect as follows and shall amend the following sections:
Section 1
October 1, 2010
New section
Sec. 2
October 1, 2010
New section
Sec. 3
October 1, 2010
New section
Statement of Purpose:
To authorize municipalities to issue municipal postemployment benefit funding bonds.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]