Substitute House Bill No. 5427
Public Act No. 22-35
AN ACT CONCERNING THE RECOMMENDATIONS OF THE OFFICE
OF FINANCE WITHIN THE OFFICE OF POLICY AND
MANAGEMENT.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Subsection (c) of section 7-374c of the general statutes is
repealed and the following is substituted in lieu thereof (Effective October
1, 2022):
(c) Any municipality which has no outstanding pension deficit
funding bonds, other than an earlier series of such obligations issued
under subsection (b) of section 7-374b or this section 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 Substitute House Bill No. 5427
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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] five-year financial plan, including the major
assumptions and plan of finance for such pension deficit funding bonds,
(E) a comparison of the anticipated effects of funding the unfunded past
benefit obligation through the issuance of pension deficit funding bonds
with the funding of the obligation through the annual actuarially
recommended contribution, prepared in the manner prescribed by the
secretary, (F) documentation of the municipality's authorization of the
issuance of such pension deficit funding bonds including a certified
copy of the resolution or ordinance of the municipality authorizing the
issuance of the pension deficit funding bonds and an opinion of
nationally recognized bond counsel as to the due authorization of the
issuance of the bonds, (G) documentation that the municipality has
adopted an ordinance, or with respect to a municipality not having the
authority to make ordinances, has adopted a resolution by a two-thirds
vote of the members of its legislative body, requiring the municipality
to appropriate funds in an amount sufficient to meet the actuarially
required contribution and contribute such amounts to the plan as
required in subdivision (3) of subsection (c) of this section, (H) the
methodology used and actuarial assumptions that will be utilized to
calculate the actuarially recommended contribution, (I) a draft official
statement with respect to the issuance of the pension deficit funding
bonds, and (J) such other information and documentation as reasonably
required by the secretary or the Treasurer to carry out the provisions of
this section. The secretary and the Treasurer may, if they deem
necessary, hire an independent actuary to review the information
submitted by the municipality. Substitute House Bill No. 5427
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(2) Not later than ten days after the sale of the pension deficit funding
bonds, the municipality shall provide the secretary and the Treasurer
with a final financing summary comparing the anticipated effects of
funding the unfunded past benefit obligation through the issuance of
the pension deficit funding bonds with the funding of the obligation
through the annual actuarially recommended contribution, prepared in
the manner prescribed by the secretary.
(3) As long as the pension deficit funding bonds or any bond
refunding such bonds are outstanding, the municipality shall (A) for
each fiscal year of the municipality commencing with the fiscal year in
which the bonds are issued, appropriate funds in an amount sufficient
to meet the actuarially required contribution and contribute such
amount to the plan, and (B) notify the secretary annually, who shall in
turn notify the Treasurer, of the amount or the rate of any such
actuarially recommended contribution and the amount or the rate, if
any, of the actual annual contribution by the municipality to the pension
plan to meet such actuarially recommended contribution. On an annual
basis, the municipality shall provide the secretary and the Treasurer
with: (i) The actuarial valuation of the pension plan, (ii) a specific
identification, in a format to be determined by the secretary, of any
changes that have been made in the actuarial assumptions or methods
compared to the previous actuarial valuation of the pension plan, (iii)
the footnote disclosure and required supplementary information
disclosure required by GASB Statement Number 27 with respect to the
pension plan, and (iv) a review of the investments of the pension plan
including a statement of the current asset allocation and an analysis of
performance by asset class. With respect to a municipality which issues
pension deficit funding bonds on or after July 1, 2006, in any fiscal year
for which such municipality fails to appropriate sufficient funds to meet
the actuarially required contribution in accordance with the provisions
of this subdivision there shall be deemed appropriated an amount
sufficient to meet such requirement, notwithstanding the provisions of Substitute House Bill No. 5427
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any other general statute or of any special act, charter, special act
charter, home-rule ordinance, local ordinance or local law.
(4) The municipality shall not issue pension deficit funding bonds
prior to, or 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.
Sec. 2. Subsection (e) of section 7-392 of the general statutes is
repealed and the following is substituted in lieu thereof (Effective October
1, 2022):
(e) The treasurer or other officer having authority over the financial
affairs of any reporting agency shall, annually, file a statement
concerning the accounts and finances of such agency with the (1) town
clerk of the town in which such agency is located, and (2) Secretary of
the Office of Policy and Management, upon the secretary's request. Such
statement shall include, but shall not be limited to, a listing of major
disbursements and sources of receipts and shall be filed not later than
ninety days after the end of the fiscal year or period which is the subject
of the statement. Each treasurer or other officer who fails to file a
statement required pursuant to this subsection shall be fined five
hundred dollars for each statement not filed. The fine shall be levied and
collected by the town clerk.
Sec. 3. Section 7-393 of the general statutes is repealed and the
following is substituted in lieu thereof (Effective October 1, 2022): Substitute House Bill No. 5427
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Upon the completion of an audit, the independent auditor shall file
certified copies of the audit report with (1) the appointing authority, (2)
in the case of a town, city or borough, with the clerk of such town, city
or borough, (3) in the case of a regional school district, with the clerks of
the towns, cities or boroughs in which such regional school district is
located and with the board of education, (4) in the case of an audited
agency, with the clerks of the towns, cities or boroughs in which such
audited agency is located, and (5) in each case, with the Secretary of the
Office of Policy and Management. Such copies shall be filed within six
months from the end of the fiscal year of the municipality, regional
school district or audited agency, but the secretary may grant an
extension of not more than thirty days, provided the auditor making the
audit and the chief executive officer of the municipality, regional school
district or audited agency shall jointly submit a request in writing to the
secretary stating the reasons for such extension at least thirty days prior
to the end of such six-month period. If the reason for the extension
relates to deficiencies in the accounting system of the municipality,
regional school district or audited agency the request must be
accompanied by a corrective action plan. The secretary may, after a
hearing with the auditor and officials of the municipality, regional
school district or audited agency, grant an additional extension if
conditions warrant. Said auditor shall preserve all of his working papers
employed in the preparation of any such audit until the expiration of
three years from the date of filing a certified copy of the audit with the
secretary and such working papers shall be available, upon written
request and upon reasonable notice from the secretary, during such time
for inspection by the secretary or his authorized representative, at the
office or place of business of the auditor, during usual business hours.
Any municipality, regional school district, audited agency or auditor
who fails to have the audit report filed on its behalf within six months
from the end of the fiscal year or within the time granted by the secretary
shall be referred by the secretary to the Municipal Finance Advisory
Commission established pursuant to section 7-394b, assessed a civil Substitute House Bill No. 5427
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penalty of not less than one thousand dollars but not more than ten
thousand dollars [. The] or both, except that the secretary may waive
such [penalty] penalties if, in [his] the secretary's opinion, there appears
to be reasonable cause for not having completed or provided the
required audit report, provided an official of the municipality, regional
school district or audited agency or the auditor submits a written
request for such waiver.
Sec. 4. Subsection (d) of section 7-395 of the general statutes is
repealed and the following is substituted in lieu thereof (Effective October
1, 2022):
(d) The secretary shall refer to the Municipal Finance Advisory
Commission any municipality that has not been previously referred to
said commission pursuant to subsection (b) of this section or section 7-
576, 7-576a, as amended by this act, or 7-576c, as amended by this act,
provided the municipality has:
(1) A negative fund balance percentage;
(2) Reported a fund balance percentage of less than five per cent in
the three immediately preceding fiscal years;
(3) Reported [a declining fund balance trend] an operating deficit in
the two immediately preceding fiscal years and a fund balance
percentage of less than five per cent in the immediately preceding fiscal
year, as determined by the statement of revenues, expenditures and
changes in fund balance of the general fund of the audited financial
statements of the municipality;
(4) Issued tax or [bond] revenue anticipation notes in the three
immediately preceding fiscal years to meet cash liquidity;
(5) [Had a general fund annual operating budget deficit of one and
one-half per cent or more of such municipality's general fund revenues Substitute House Bill No. 5427
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in the immediately preceding fiscal year] Did not file an annual audit
report in the twelve months after the end of the fiscal year;
(6) [Had a general fund annual operating budget deficit of two per
cent or more of such municipality's average general fund revenues in
the two immediately preceding fiscal years] Reported an annual audit
that included at least one material or significant audit finding that was
reported in the annual audits of the two immediately preceding fiscal
years; or
(7) Received a bond rating below A from a bond rating agency.
Sec. 5. Section 7-406c of the general statutes is repealed and the
following is substituted in lieu thereof (Effective October 1, 2022):
(a) Not later than July 1, 2014, the Secretary of the Office of Policy and
Management shall, in consultation with the Department of Education,
the Connecticut Conference of Municipalities and the Council of Small
Towns, develop and implement a uniform system of accounting for
municipal revenues and expenditures, including, but not limited to,
board of education and grant agency expenditures and revenue. Such
uniform system of accounting shall include a uniform chart of accounts
to be used at the municipal level. Such chart of accounts shall include,
but not be limited to, all amounts and sources of revenue and donations
of cash and real or personal property in the aggregate totaling five
hundred dollars or more received by a municipality. The secretary shall
make such chart of accounts available on the Internet web site of the
Office of Policy and Management.
(b) Not later than June 30, 2015, each municipality shall implement
the uniform system of accounting for municipal revenues and
expenditures developed pursuant to subsection (a) of this section by
using such uniform system to complete and file annual reports with the
Office of Policy and Management as may be required by the secretary in Substitute House Bill No. 5427
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order to increase transparency regarding municipal expenditures and to
meet the state's benchmarking goals. Any annual report required
pursuant to this subsection shall be filed not later than January thirty-
first annually.
(c) Not later than January 31, 2023, and annually thereafter, each
municipality shall file financial data with the Office of Policy and
Management. Such data shall (1) be filed electronically, in a form and
manner prescribed by the Secretary of the Office of Policy and
Management, and (2) contain such municipality's audited financial
statements and any other information required by said secretary to
determine the financial condition of such municipality.
Sec. 6. Section 7-560 of the general statutes is repealed and the
following is substituted in lieu thereof (Effective October 1, 2022):
Whenever used in subsection (a) of section 7-394b, and sections 7-560
to 7-579, inclusive, the following definitions shall apply:
(1) "Attorney General" means the Attorney General of the state of
Connecticut.
(2) "Certified municipality" means a municipality that has been
certified as a tier I or tier II municipality by the secretary.
(3) "Chief executive officer" means the officer described in section 7-
193.
(4) "Debt service payment fund" means the fund into which the
proceeds of the property tax intercept procedure are deposited and from
which debt service on all outstanding general obligations of a
municipality which have a term of more than one year and additionally
all outstanding general obligations which the municipality determines
are to be supported by the tax intercept procedure shall be paid as
provided in subsection (a) of section 7-394b and sections 7-560 to 7-579, Substitute House Bill No. 5427
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inclusive.
(5) "Debt service payment fund requirement" means an amount at
least equal to the aggregate amount of principal, sinking fund
installments, if any, and interest during the then current fiscal year as
the same become due and payable on all outstanding general
obligations of the municipality which have a term of more than one year
and additionally all outstanding general obligations which the
municipality determines are to be supported by the tax intercept
procedure.
(6) "Deficit" means with respect to the general fund of any
municipality, any cumulative excess of expenditures, encumbrances, or
other uses of funds for any fiscal year and all prior fiscal years over
revenues of the municipality for such period and the prior year's
unassigned fund balance, as reflected in the most recent audited
financial statements of such municipality. For purposes of determining
such excess, revenues shall not include the proceeds of tax anticipation
notes and expenditures shall not include any principal payment of tax
anticipation notes.
(7) "Deficit obligation" means any general obligation with a term of
more than one year or any bond or any note issued in anticipation
thereof, issued by a municipality either for the purpose of or having the
effect of reducing, eliminating or preventing a general fund, special
revenue fund or enterprise fund deficiency, other than any obligation
issued pursuant to chapter 110.
(8) "Designated tier I municipality" means a municipality designated
as a tier I municipality in accordance with the provisions of section 7-
576a, as amended by this act.
(9) "Designated tier II municipality" means a municipality designated
as a tier II municipality in accordance with the provisions of section 7- Substitute House Bill No. 5427
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576b, as amended by this act.
(10) "Designated tier III municipality" means a municipality
designated as a tier III municipality in accordance with the provisions
of section 7-576c, as amended by this act.
(11) "Designated tier IV municipality" means a municipality
designated as a tier IV municipality in accordance with the provisions
of section 7-576e, as amended by this act.
(12) "Equalized mill rate" means the tax rate derived from the most
recent available grand levy of a municipality divided by the equalized
net grand list on which such levy is based, as determined by the
secretary in accordance with section 10-261a.
(13) "Fund balance" means the amount that assets and deferred
outflow of resources of a municipality's general fund exceeds the
liabilities and deferred inflow of resources of the general fund of the
municipality, as of the fiscal year ended as reflected in the municipality's
most recent audited financial statements presented in accordance with
generally accepted accounting principles.
(14) "Fund balance percentage" means the fund balance of the general
fund of a municipality as of the fiscal year ended in the municipality's
most recent audited financial statements and presented in accordance
with generally accepted accounting principles, divided by the sum of
revenues of the general fund and operating transfers into the general
fund for the fiscal year.
(15) "General fund deficiency" means a deficit or a projected fiscal
year deficit, or both.
(16) "General obligation" means an obligation issued by a
municipality and secured by the full faith and credit and taxing power
of such municipality including any contingent obligation which is Substitute House Bill No. 5427
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payable from the general fund and is subject to annual appropriation.
(17) "Maximum required capital reserve" means the maximum
aggregate amount of principal, interest and other amounts due and
owing during any succeeding fiscal year, excluding any sinking fund
installments payable in a prior fiscal year on outstanding general
obligations of a certified municipality supported by a special capital
reserve fund issued pursuant to subsection (a) of section 7-394b and
sections 7-568 to 7-579, inclusive.
(18) "Minimum required capital reserve" means the aggregate
amount of principal, sinking fund installments, interest and other
amounts due and owing during the next succeeding fiscal year on
outstanding general obligations of a certified municipality supported by
a special capital reserve fund pursuant to subsection (a) of section 7-394b
and sections 7-560 to 7-579, inclusive.
(19) "Municipal Accountability Review Board" means the Municipal
Accountability Review Board established pursuant to section 7-576d, as
amended by this act.
(20) "Municipal aid" means formula grants, grants, payments in lieu
of taxes, reimbursements, payments and other funding provided by the
state to municipalities and used to fund municipal general fund
budgets, including education budgets.
(21) "Municipal Finance Advisory Commission" means the Municipal
Finance Advisory Commission established in section 7-394b.
(22) "Municipal restructuring fund loan" means a loan received by a
municipality from the Municipal Restructuring Fund pursuant to
section 7-576i, as amended by this act.
[(22)] (23) "Municipal revenue increase in fiscal year ending June 30,
2018, as a per cent of revenues" means the net difference in estimated Substitute House Bill No. 5427
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municipal revenues from state sources and new municipal taxing
authority as compiled by the secretary pursuant to section 4-71b for the
fiscal year ending June 30, 2018, as compared to the estimated municipal
revenues from such sources compiled by the secretary pursuant to
section 4-71b for the fiscal year ending June 30, 2017, divided by the sum
of revenues of the general fund and operating transfers into the general
fund as reported in the municipality's audited financial statements for
the fiscal year ending June 30, 2016.
[(23)] (24) "Municipality" means any town, city, borough,
consolidated town and city, consolidated city and borough, any
metropolitan district, any district, as defined in section 7-324, and any
other political subdivision of the state having the power to levy taxes
and to issue bonds, notes or other obligations.
[(24)] (25) "Obligation" means any bond, bond anticipation note or
other interim funding obligation, certificate of participation, security,
financing lease, installment purchase agreements, capital lease,
receivable or other asset sale, refinancing covered by this definition and
any other transaction which constitutes debt in accordance with both
municipal reporting standards in section 7-394a and the regulations
prescribing municipal financial reporting adopted by the secretary.
[(25)] (26) "Outstanding obligation" means any obligation with
respect to which a principal or interest payment, sinking fund
installment or other payment or deposit is, or will be, due in the future
and for which moneys or defeasance securities have not been deposited
in escrow.
[(26)] (27) "Projected fiscal year deficit" means, with respect to the
general fund of any municipality during any fiscal year, the excess of
estimated expenditures and uses of funds for the fiscal year over
estimated revenues and any cumulative unassigned general fund
balance from the prior fiscal year. For purposes of determining such Substitute House Bill No. 5427
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excess, estimated revenues shall not include the proceeds of tax
anticipation notes and estimated expenditures shall not include any
principal payment of tax anticipation notes.
[(27)] (28) "Property taxes" means all taxes on real and personal
property levied by the municipality in accordance with the general
statutes including any interest, penalties and other related charges, and
shall not mean any rent, rate, fee, special assessment or other charge
based on benefit or use.
[(28)] (29) "Property tax intercept procedure" means a procedure
where a municipality provides for the collection and deposit in a debt
service payment fund maintained with a trustee of all property taxes
needed to meet the debt service payment fund requirement and which
meets all the requirements of section 7-562.
[(29)] (30) "Property tax levy" means the mill rate of the municipality
multiplied by the net taxable grand list of the municipality.
[(30)] (31) "Revenues" means, with respect to the general fund for any
municipality for any fiscal year, property taxes and other moneys that
are generally available for, accounted for and deposited in the
municipality's general fund.
[(31)] (32) "Secretary" means the Secretary of the Office of Policy and
Management.
[(32)] (33) "Special capital reserve fund" means the fund established
pursuant to section 7-571 to secure the timely payment of principal and
interest on general obligations issued by a certified municipality
approved by the Treasurer pursuant to section 7-573.
[(33)] (34) "State" means the state of Connecticut.
[(34)] (35) "Tier I municipality" means any municipality which has Substitute House Bill No. 5427
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applied to and been certified by the secretary as a tier I municipality.
[(35)] (36) "Tier II municipality" means any municipality which has
applied to and been certified by the secretary as a tier II municipality.
[(36)] (37) "Treasurer" means the Treasurer of the state of Connecticut.
[(37)] (38) "Trustee" means any trust company or bank having the
powers of a trust company within or without the state, appointed by the
municipality as trustee for the municipality's tax intercept procedure or
special capital reserve fund and approved by the Treasurer, as well as
any successor trust company or bank having the powers of a trust
company within or without the state succeeding a prior trust company
or bank as trustee, so appointed and approved.
Sec. 7. Section 7-576a of the general statutes is repealed and the
following is substituted in lieu thereof (Effective October 1, 2022):
(a) [The chief elected official of a municipality may apply to the
secretary to request designation as a tier I municipality if any of the
following conditions exist: (1) The municipality has no bond rating, or
its highest bond rating is A or above, provided the municipality has no
rating that is not investment grade, receives less than thirty per cent of
its current fiscal year general fund budget revenues in the form of
municipal aid from the state, has a positive fund balance percentage,
and has a municipal revenue increase in fiscal year ending June 30, 2018,
as a per cent of revenues of two per cent or more, (2) the municipality
has no bond rating or its highest bond rating is A, provided the
municipality has no rating that is not investment grade, receives less
than thirty per cent of its current fiscal year general fund budget
revenues in the form of municipal aid from the state, and had a positive
fund balance percentage of less than five per cent, or (3) the
municipality's highest bond rating is AA or above, provided the
municipality has no rating that is not investment grade, receives thirty Substitute House Bill No. 5427
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per cent or more of its current fiscal year general fund budget revenues
in the form of municipal aid from the state, has an equalized mill rate of
less than thirty, has a positive fund balance percentage, and has a
municipal revenue increase in the fiscal year ending June 30, 2018, as a
per cent of revenues of two per cent or more.] Any municipality referred
pursuant to subsection (d) of section 7-395, as amended by this act, to
the Municipal Finance Advisory Commission shall be designated a tier
I municipality. The chief elected official of any municipality that does
not meet the conditions identified under subsection (d) of section 7-395,
as amended by this act, may apply to the Municipal Finance Advisory
Commission for designation as a tier I municipality, provided such
official (1) expects that such municipality will meet one or more such
conditions in the following twenty-four month period, and (2) submits
a report to the Municipal Finance Advisory Commission, in a form and
manner prescribed by the commission, that confirms that such condition
or conditions will be met in such period.
(b) The secretary shall refer any municipality [which has requested
designation] designated as a tier I municipality to the Municipal Finance
Advisory Commission, pursuant to the provisions of section 7-395, as
amended by this act. In addition to the requirements of section 7-394b,
such municipality shall prepare and present a [three-year] five-year
financial plan to the Municipal Finance Advisory Commission for its
review and approval.
Sec. 8. Section 7-576b of the general statutes is repealed and the
following is substituted in lieu thereof (Effective October 1, 2022):
(a) The chief elected official of a municipality designated as a tier I
municipality pursuant to section 7-576a, as amended by this act, may
apply to the secretary to request designation as a tier II municipality if
[any of the following conditions exist: (1) The municipality has no bond
rating from a bond rating agency, or, if its highest bond rating is A,
provided the municipality has no rating that is not investment grade, Substitute House Bill No. 5427
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receives thirty per cent or more of its current or prior fiscal year general
fund budget revenues were or are in the form of municipal aid from the
state, has a positive fund balance percentage of five per cent or more,
has an equalized mill rate of less than thirty, and has a municipal
revenue increase in fiscal year ending June 30, 2018, as a per cent of
revenues of two per cent or more, (2) the municipality has no bond
rating from a bond rating agency, or, if its highest bond rating is A,
provided the municipality has no rating that is not investment grade,
receives thirty per cent or more of its current or prior fiscal year general
fund budget revenues were or are in the form of municipal aid from the
state, has an equalized mill rate of less than thirty, and has a positive
fund balance percentage of less than five per cent, (3) the municipality's
highest bond rating is AA or higher, provided the municipality has no
rating that is not investment grade, receives thirty per cent or more of
its current or prior fiscal year general fund budget revenues were or are
in the form of municipal aid from the state, and has an equalized mill
rate of thirty or more, (4) the municipality's highest bond rating is AA
or higher, provided the municipality has no rating that is not investment
grade, and has a negative fund balance percentage, or (5) the
municipality's highest bond rating is Baa or BBB, provided the
municipality has no rating that is not investment grade, has a positive
fund balance percentage and] the municipality has held one or more
meetings with the Municipal Finance Advisory Committee, and (1) has
an equalized mill rate of not less than thirty, or (2) received thirty per
cent or more of its most recent audited financial statement revenues in
the form of municipal aid from the state. Any such official that applies
for such designation pursuant to this subsection shall provide a copy of
such application to the Municipal Finance Advisory Committee not later
than ten days after making such application.
(b) The secretary shall [refer any municipality which has requested
designation as a tier II] (1) designate any tier I municipality as a tier II
municipality at the request of such municipality, if the secretary Substitute House Bill No. 5427
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determines that the fiscal condition of the municipality warrants such
designation, based on the secretary's review of the reports and findings
of the Municipal Finance Advisory Commission concerning such
municipality, and (2) refer such municipality to the Municipal
Accountability Review Board established pursuant to section 7-576d, as
amended by this act. Said board shall have the same authority and
responsibilities possessed by the Municipal Finance Advisory
Commission with respect to tier II certified municipalities referred to it,
including, but not limited to, requiring that such municipalities prepare
and present to said board for its review and approval a [three-year] five-
year financial plan and monthly financial reports, in a manner
prescribed by said board. In preparing and adopting its annual budgets,
such municipality shall only include assumptions respecting state
revenues and property tax revenues as approved by such board and
such board shall approve or disapprove all obligations issued by a
designated tier II municipality pursuant to section 7-575 and this
section, provided it shall only approve such obligations which in its
judgment improve the financial condition of such municipality.
(c) The Municipal Finance Advisory Commission may, after holding
at least one meeting with a designated tier I municipality, recommend
to the secretary that such municipality be designated as a tier II
municipality. Any such recommendation shall be made on the basis of
such municipality's financial condition, which shall be documented by
the commission in a report submitted to the secretary. A copy of such
report shall be provided to such municipality not later than ten days
after such submission. Not later than forty-five days after such
submission, the secretary may approve or reject such recommendation.
If the secretary does not approve or reject such recommendation during
such forty-five-day period, such recommendation shall be deemed
rejected.
Sec. 9. Section 7-576c of the general statutes is repealed and the Substitute House Bill No. 5427
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following is substituted in lieu thereof (Effective October 1, 2022):
(a) The chief elected official of a municipality designated as a tier I
municipality pursuant to section 7-576a, as amended by this act, or the
legislative body of such municipality, by majority vote, may apply to
the secretary to request designation as a tier III municipality after
holding at least one meeting with the Municipal Finance Advisory
Commission, if [any of the following conditions exist: (1) The
municipality has at least one bond rating from a bond rating agency that
is below investment grade, or (2) the municipality has no bond rating
from a bond rating agency, or, if its highest bond rating is A, Baa or BBB,
provided the municipality has no rating that is not investment grade,
and it has either (A) a negative fund balance percentage, or (B)] the
municipality (1) has an equalized mill rate that is thirty or more, [and it
receives] or (2) received thirty per cent or more of its [current or prior
fiscal year general fund budget revenues were or are] most recent
audited financial statement revenues in the form of municipal aid from
the state. Prior to submission of such request by a chief elected official,
such official shall provide notice of intent to apply for such designation
to the legislative body of such municipality. Such legislative body shall
have [thirty] forty-five days from receipt of such notice to approve or
reject the chief elected official's decision to submit such a request. If such
legislative body does not approve or reject such decision during such
[thirty-day] forty-five-day period, the chief elected official's decision to
submit such request shall be deemed approved by such legislative body.
Any chief elected official or legislative body that submits a request
pursuant to this subsection shall provide a copy of such request to the
Municipal Finance Advisory Commission not later than ten days after
submitting such request. The secretary shall designate a municipality as
tier III if [: (i) A municipality meets either condition described in
subdivision (1) or (2) of] a request for such designation has been made
pursuant to this subsection, and based on reports and findings of the
Municipal Finance Advisory Commission, the secretary finds that the Substitute House Bill No. 5427
Public Act No. 22-35 19 of 30
fiscal condition of the municipality warrants such designation. [, (ii) the
municipality]
(b) Any municipality that (1) receives a bond rating below investment
grade from a rating agency, (2) issues refunding bonds that [(I)] (A) have
a term of more than twenty-five years, [(II)] (B) do not achieve net
present value savings pursuant to the provisions of section 7-370c, and
[(III)] (C) have annual debt service obligations associated with any
existing debt and such refunding bonds in any year that are greater than
the first full year debt service obligation following the issuance of such
refunding bonds, or [(iii) the municipality] (3) issues a deficit obligation
[or has issued a deficit obligation in the five years preceding July 1,
2017.] shall be designated as a tier III municipality. Any municipality
that meets one or more conditions described in subdivisions (1) to (3),
inclusive, of this subsection, shall notify the secretary not later than ten
days after having met such condition or conditions.
(c) The Municipal Finance Advisory Commission may, after holding
at least one meeting with a designated tier I municipality, recommend
to the secretary that such municipality be designated as a tier III
municipality. Any such recommendation shall be made on the basis of
such municipality's financial condition, which shall be documented by
the commission in a report submitted to the secretary. A copy of such
report shall be provided to such municipality not later than ten days
after such submission. Not later than forty-five days after such
submission, the secretary may approve or reject such recommendation.
If the secretary does not approve or reject such recommendation during
such forty-five-day period, such recommendation shall be deemed
rejected.
[(b)] (d) The secretary shall refer any municipality that is a designated
tier III municipality to the Municipal Accountability Review Board
established pursuant to the provisions of section 7-576d, as amended by
this act. Substitute House Bill No. 5427
Public Act No. 22-35 20 of 30
[(c) Notwithstanding any provision of this section, no municipality
shall be designated a tier III municipality prior to July 1, 2018, by any
means other than an application as described in subsection (a) of this
section, except a municipality with a population of one hundred twenty
thousand or more that has a bond rating of Caa1 or less.]
Sec. 10. Subdivision (6) of subsection (b) of section 7-576d of the
general statutes is repealed and the following is substituted in lieu
thereof (Effective October 1, 2022):
(6) With respect to any municipality referred to the Municipal
Accountability Review Board on or after [January 1, 2018] October 1,
2022, in the case of any proposed collective bargaining agreement or
amendments negotiated pursuant to sections 7-467 to 7-477, inclusive,
including any such agreement negotiated by a board of education,
notwithstanding the provisions of subsection (d) of section 7-474, or
pursuant to section 10-153d, the Municipal Accountability Review
Board shall have the same opportunity and authority to approve or
reject, on not more than two occasions, collective bargaining agreements
or amendments as are provided to the legislative body of such
municipality in said respective sections, except that (A) any such
agreement negotiated by a board of education shall be submitted to the
Municipal Accountability Review Board by the bargaining
representative of such board of education not later than fourteen days
after any such agreement is reached, and (B) [the Municipal
Accountability Review Board shall act upon such agreement, pursuant
to this subdivision, not later than thirty days after submission by such
bargaining representative] such agreement shall be considered
approved thirty days after such submission if the Municipal
Accountability Review Board has failed to approve or reject such
agreement.
Sec. 11. Subdivision (8) of subsection (b) of section 7-576d of the
general statutes is repealed and the following is substituted in lieu Substitute House Bill No. 5427
Public Act No. 22-35 21 of 30
thereof (Effective October 1, 2022):
(8) The board shall monitor compliance with the municipality's
[three-year] five-year financial plan and annual budget and recommend
that the municipality make such changes as are necessary to ensure
budgetary balance in such plan and budget.
Sec. 12. Subsection (a) of section 7-576e of the general statutes is
repealed and the following is substituted in lieu thereof (Effective October
1, 2022):
(a) (1) The chief elected official of a tier III municipality or the
legislative body of such municipality, by a majority vote, may apply to
the secretary to request designation as a tier IV municipality. The
secretary may approve the request if the secretary determines that such
designation is necessary to ensure the fiscal sustainability of the
municipality and is in the best interests of the state. Prior to submission
of any such request by the chief elected official, such official shall
provide notice of intent to apply for such designation to the legislative
body of such municipality. Such legislative body shall have thirty days
from receipt of such notice to approve or reject the chief elected official's
decision to submit such a request. If such legislative body does not
approve or reject such decision to seek such designation during such
thirty-day period, the chief elected official's decision to submit such
request shall be deemed approved by such legislative body.
(2) The Municipal Accountability Review Board may designate a tier
III municipality as a tier IV municipality based on a finding by the board
that the fiscal condition of such municipality warrants such a
designation based upon an evaluation of the following criteria: (A) The
balance in the municipal reserve fund; (B) the short and long-term
liabilities of the municipality, including, but not limited to, the
municipality's ability to meet minimum funding levels required by law,
contract or court order; (C) the initial budgeted revenue for the Substitute House Bill No. 5427
Public Act No. 22-35 22 of 30
municipality for the past five fiscal years as compared to the actual
revenue received by the municipality for such fiscal years; (D) budget
projections for the following [three] five fiscal years; (E) the economic
outlook for the municipality; and (F) the municipality's access to capital
markets. For the purpose of determining whether to make a finding
pursuant to this subdivision, the membership of the board shall
additionally include the chief elected official of such municipality, the
treasurer of such municipality and a member of the legislative body of
such municipality, as selected by such body. In conducting a vote on
any such determination, the treasurer of such municipality shall be a
non-voting member of the board. The board shall submit such finding
and recommended designation to the secretary, who shall provide for a
thirty-day notice and public comment period related to such finding
and recommendation. Following the public notice and comment period,
the secretary shall forward the board's finding and recommended
designation and a report regarding the comments received in this regard
to the Governor. Following the receipt of such documentation from the
secretary, the Governor may approve or disapprove the board's
recommended designation.
(3) If any municipality is designated as a tier IV municipality, the
following individuals shall serve as ex-officio, nonvoting members of
the Municipal Accountability Review Board, provided such additional
members shall only serve for purposes of the tier IV municipality that
they represent: (A) The chief elected official of such municipality, or the
chief elected official's designee, (B) an elected member of the local
legislative body of such municipality, or such member's designee, as
selected by a majority vote of the local legislative body of such
municipality, (C) in the case where the municipality has an elected
treasurer, the municipal treasurer or other municipal official responsible
for the issuance of bonds, and (D) a member of the minority party of the
municipality's legislative body as elected by such minority party
members. Notwithstanding the provisions of sections 7-568 to 7-575, Substitute House Bill No. 5427
Public Act No. 22-35 23 of 30
inclusive, and sections 7-576a, as amended by this act, and 7-576b, as
amended by this act, a municipality designated as a tier IV municipality
pursuant to this section shall retain such designation following the
issuance of a deficit obligation subsequent to such municipality's
designation as a tier IV municipality. With respect to a designated tier
IV municipality, the Municipal Accountability Review Board shall have
the same powers and responsibilities as it has with respect to designated
tier III municipalities in addition to which it shall have the following
additional or superseding authority and responsibilities:
(i) To review and approve or disapprove the municipality's annual
budget, including, but not limited to, the general fund, other
governmental funds, enterprise funds and internal service funds. No
annual budget, annual tax levy or user fee for the municipality shall
become operative until it has been approved by the board. If the board
disapproves any annual budget, not later than the May twenty-first
prior to the beginning of the new fiscal year, the board shall specify the
reasons for such disapproval and shall provide the legislative body until
the June fifteenth prior to the beginning of the new fiscal year to
resubmit the annual budget in accordance with this section. If the
legislative body has not adopted a budget by such June fifteenth date or
its resubmitted annual budget is not approved by the board, the board
shall adopt an interim budget and establish a tax rate and user fees. Such
interim budget shall take effect at the commencement of the fiscal year
and shall remain in effect until the municipality submits and the board
approves a modified budget. Notwithstanding any provision of the
general statutes, or any public or special act, local law, charter or
ordinance or resolution, a municipality may approve a modified budget
pursuant to this section after any applicable deadline for such adoption
has passed.
(ii) To review and approve all bond ordinances and bond resolutions
of the municipality. Substitute House Bill No. 5427
Public Act No. 22-35 24 of 30
(iii) To monitor compliance with the municipality's [three-year] five-
year financial plan and annual budget and require that the municipality
make such changes as are necessary to ensure budgetary balance in such
plan and budget.
(iv) To approve or reject all collective bargaining agreements for a
new term, other than modifications, amendments or reopening of an
agreement, to be entered into by the municipality or any of its agencies
or administrative units, including the board of education. If it rejects an
agreement, the board shall indicate the specific provisions of the
proposed agreement present or missing which caused the rejection, as
well as its rationale for the rejection. The board may indicate the total
cost impact or savings that are acceptable in a new agreement. At any
time during negotiations and prior to reaching any agreement, or a
modified agreement, the parties, by mutual agreement, may request
guidance from the board as to the level and areas of savings that may be
acceptable to the board in a new agreement. Following any rejection of
a proposed collective bargaining agreement, the parties to the
agreement shall have ten days from the date of the board's rejection to
consider the board's concerns and propose a modified agreement. After
the expiration of such ten-day period, the board shall approve or reject
any such modified agreement. If the parties have been unable to reach a
modified agreement or the board rejects such modified agreement, the
board shall impose binding arbitration on the parties, in accordance
with clause (v) of this subdivision, to arbitrate issues identified by the
board as the cause for such inability or rejection. In establishing the
issues to be arbitrated, as well as in making a determination to reject a
proposed agreement, the board shall not be limited to matters raised or
negotiated by the parties. Also, to approve or reject all modifications,
amendments or reopeners to collective bargaining agreements entered
into by the municipality or any of its agencies or administrative units,
including the board of education. If it rejects a modification, amendment
or reopener to an agreement, the board shall indicate the specific Substitute House Bill No. 5427
Public Act No. 22-35 25 of 30
provisions of the proposed modification, amendment or reopener which
caused the rejection, as well as its rationale for the rejection. The board
may indicate the total cost impact or savings acceptable in a new
modification, amendment or reopener. If the board rejects a proposed
amendment or reopener to a collective bargaining agreement, the
parties to the agreement shall have ten days from the date of the board's
rejection to consider the board's concerns and put forth a revised
modification, amendment or reopener. After the expiration of such ten-
day period, the board shall approve or reject any revised modification,
amendment or reopener amendment. If the parties are unable to reach
a revised modification, amendment or reopener or the board rejects
such revised modification, amendment or reopener, the board shall
impose binding arbitration upon the parties in accordance with clause
(v) of this subdivision. The issues to be arbitrated shall be those
identified by the board as causing such inability or rejection. Prior to the
board taking action on any such modification, amendment or reopener,
the parties shall have an opportunity to make a presentation to the
board.
(v) Except as otherwise provided in this subdivision, with respect to
collective bargaining agreements of the municipality or any of its
agencies or administrative units, including, but not limited to, the board
of education, that are in or are subject to binding arbitration, the board
shall have the power to impose binding arbitration upon the parties any
time after the seventy-fifth day following the commencement of
negotiations or to reject any arbitration award pending municipal or
board of education action pursuant to section 7-473c or 10-153f on the
date the board is established. If, upon the date of a municipality's
designation as a tier IV municipality, the parties are in binding
arbitration, or if the board rejects a pending arbitration award, the board
shall immediately replace any established binding arbitration panel
with an arbitrator selected in accordance with this section. If the board
imposes binding arbitration or replaces an existing binding arbitration Substitute House Bill No. 5427
Public Act No. 22-35 26 of 30
panel, it shall do so with an arbitrator selected by the Governor from a
list of three potential arbitrators approved by and submitted to the
Governor by the board. Such list of potential arbitrators shall include
former judges of the state or federal judicial systems or other persons
who have experience with arbitration or similar proceedings. Prior to
the Governor's selection of an arbitrator, the parties may provide
recommendations for such selection to the board. The board shall not be
limited to selecting arbitrators from those recommended by the parties.
The board may reduce the time limits in the applicable provisions of the
general statutes or any public or special acts governing binding
arbitration by one-half. In imposing such arbitration or in replacing an
arbitration panel, the board shall not be limited to consideration and
inclusion in the collective bargaining agreement of the last best offers or
the matters raised by or negotiated by the parties provided the board
shall indicate reasons for raising any matters not negotiated by the
parties. The board shall be given the opportunity to make a presentation
before the arbitrator. In addition to any statutory factors that shall be
considered by the arbitrator with respect to proposed municipal or
board of education collective bargaining agreements, the arbitrator shall
give highest priority to the short and long-term fiscal exigencies that
resulted in the municipality's designation as a tier IV municipality. Not
later than ten days after the issuance of any of the arbitrator's decisions
on the matters subject to such binding arbitration, the board may
request reconsideration of one or more of such decisions and state its
position as to the impact of such decisions on the short and long-term
fiscal sustainability of the municipality. Not later than five days after the
board's request for such reconsideration, the parties may submit
comments to the arbitrator in response to the board's stated position.
Not later than thirty days following the board's request for such
reconsideration, the arbitrator, based on the record of the arbitration,
may either modify or maintain the original arbitration decisions. The
arbitrator's decisions shall be binding upon the parties. With respect to
collective bargaining agreements negotiated pursuant to section 10- Substitute House Bill No. 5427
Public Act No. 22-35 27 of 30
153d and arbitration awards issued pursuant to section 10-153f, the
provisions of this subdivision shall not apply until the board has
rejected such agreement or award pursuant to subdivision (7) of
subsection (b) of section 7-576d, as amended by this act, on two
occasions.
(4) (A) To require its approval of proposed transfers of a
municipality's appropriations in excess of fifty thousand dollars, (B) to
require its review, approval, disapproval or modification of the budget
of the board of education for the municipality on a line-item basis and
to require the board of education to submit to it any budget transfers, or
(C) to appoint a financial manager and delegate to such manager, in
writing, such powers as the board deems necessary or appropriate for
the purpose of managing the financial and administrative affairs of the
municipality for the period of time during which the municipality is
subject to the powers of the board provided the board may override any
actions taken by such manager at any time and shall not delegate the
powers enumerated under subdivisions (2), (3) and (5) to (7), inclusive,
and (11) to (13), inclusive, of subsection (b) of section 7-576d, as
amended by this act, or subdivisions (1), (2) and (4) to (6), inclusive of
this subsection. The board shall consult with such municipality and the
board of education of such municipality, as applicable, to establish
policies and procedures for the implementation of the provisions of
subparagraphs (A) and (B) of this subdivision.
(5) The board may require that the municipality or its board of
education notify and submit to the board any or all municipal or board
of education contracts that exceed (A) fifty thousand dollars for
municipalities with a resident population under seventy thousand, or
(B) one hundred thousand dollars for municipalities with a resident
population of seventy thousand or more, not less than thirty days prior
to execution of such contract, for the purpose of the board's review and
approval of such contracts. The board shall establish policies and Substitute House Bill No. 5427
Public Act No. 22-35 28 of 30
procedures, in consultation with any such municipality and such
municipality's board of education, to implement the provisions of this
subdivision.
(6) To approve and authorize the issuance of obligations under
section 7-575, including, with regard to a designated tier IV municipality
otherwise ineligible to issue such obligations, for the purposes of issuing
general obligations for purposes of deficit financing, addressing pension
liabilities in accordance with section 7-374c, as amended by this act, debt
restructuring and other purposes allowed for which municipal
obligations are authorized by the general statutes.
Sec. 13. Section 7-576f of the general statutes is repealed and the
following is substituted in lieu thereof (Effective October 1, 2022):
(a) A municipality designated as a tier I municipality in accordance
with section 7-576a, [or designated as a] as amended by this act, tier II
municipality in accordance with section 7-576b, as amended by this act,
tier III municipality in accordance with section 7-576c, as amended by
this act, or tier IV municipality in accordance with section 7-576e, as
amended by this act, shall retain such designation, notwithstanding any
positive changes in the factors leading to its current designation, [or]
until, in the fiscal years following such designation, (1) there have been
no [annual] audited operating [budgetary] deficits in the general fund
of the municipality for two consecutive fiscal years, (2) the
municipality's bond rating has either improved or remained unchanged
since its most current designation, (3) the municipality has presented
and the commission or board has approved a financial plan that projects
a positive [unreserved] fund balance for the three succeeding
consecutive fiscal years covered by such financial plan, where a positive
fund balance of at least five per cent is projected in the third such fiscal
year, and (4) the municipality's audits for such consecutive fiscal years
have been completed and contain no general fund deficit.
[Notwithstanding any other provisions of sections 7-560 to 7-575, Substitute House Bill No. 5427
Public Act No. 22-35 29 of 30
inclusive, sections 7-568 to 7-579, inclusive, the municipality shall
remain undesignated for purposes of a tier designation, unless
circumstances would result in the municipality being designated as a
tier numerically higher than its most recent designation.]
(b) Notwithstanding subsection (a) of this section, the Municipal
Finance Advisory Commission may, by unanimous vote, end the
designation of a municipality designated as a tier I municipality, based
on an evaluation of such municipality's financial condition.
Sec. 14. Subsection (a) of section 7-576i of the general statutes is
repealed and the following is substituted in lieu thereof (Effective October
1, 2022):
(a) Any designated tier II, III, or IV municipality shall be eligible to
receive funding from the Municipal Restructuring Fund, which fund
shall be nonlapsing. A designated tier II, III or IV municipality seeking
such funds shall submit, for approval by the Secretary of the Office of
Policy and Management, a plan detailing its overall restructuring plan,
including local actions to be taken and its proposed use of such funds.
Notwithstanding section 10-262j, a municipality may, as part of such
plan and in consultation with its local board of education, submit a
proposed reduction in the minimum budget requirement related to its
education budget. The secretary shall consult with the Commissioner of
Education in approving or rejecting such proposed reduction. The
secretary shall consult with the municipal accountability review board
in making distribution decisions and attaching appropriate conditions
thereto, including the timing of any such distributions and whether such
funds shall be distributed in the form of a municipal restructuring fund
loan subject to repayment by the municipality. The distribution of such
assistance funds shall be based on the relative fiscal needs of the
requesting municipalities. The secretary may approve all, none or a
portion of the funds requested by a municipality. In attaching
conditions to such funding, the secretary shall consider the impact of Substitute House Bill No. 5427
Public Act No. 22-35 30 of 30
such conditions on the ability of a municipality to meet legal and other
obligations. The board shall monitor and report to the secretary on the
use of such funds and adherence to the conditions attached thereto. The
secretary shall develop and issue guidance on the (1) administration of
the municipal restructuring fund, (2) criteria for participation by
municipalities and requirements for plan submission, and (3)
prioritization for the awarding of assistance funds pursuant to this
section. Any municipality that receives funding from the municipal
restructuring fund, in addition to the other responsibilities and
authority given to the board with respect to designated tiers II, III and
IV municipalities, shall be required to receive board approval of its
annual budgets.
Sec. 15. Section 7-576g of the general statutes is repealed. (Effective
October 1, 2022)