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General Assembly Raised Bill No. 5472
February Session, 2024
LCO No. 665
Referred to Committee on PLANNING AND DEVELOPMENT
Introduced by:
(PD)
AN ACT CONCERNING MUNICIPAL FINANCE AND AUDITS.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Section 7-576a of the general statutes is repealed and the 1
following is substituted in lieu thereof (Effective July 1, 2024): 2
[(a) Any] The Municipal Finance Advisory Commission may 3
designate any municipality referred to said commission pursuant to 4
subsection (d) of section 7-395 [to the Municipal Finance Advisory 5
Commission shall be designated] as a tier I municipality. The chief 6
elected official of any municipality that does not meet the conditions 7
identified under subsection (d) of section 7-395 may apply to the 8
Municipal Finance Advisory Commission for designation as a tier I 9
municipality, provided such official (1) expects that such municipality 10
will meet one or more such conditions in the following twenty-four 11
month period, and (2) submits a report to the Municipal Finance 12
Advisory Commission, in a form and manner prescribed by the 13
commission, that confirms that such condition or conditions will be met 14
in such period. Each decision to designate a municipality as a tier I 15
municipality pursuant to this section shall be based on an evaluation of 16 Raised Bill No. 5472
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such municipality's financial condition and financial practices. In 17
addition to the requirements of section 7-394b, each municipality 18
designated as a tier I municipality shall prepare and present a five-year 19
financial plan to the Municipal Finance Advisory Commission for its 20
review and approval. 21
[(b) The secretary shall refer any municipality designated as a tier I 22
municipality to the Municipal Finance Advisory Commission, pursuant 23
to the provisions of section 7-395. In addition to the requirements of 24
section 7-394b, such municipality shall prepare and present a five-year 25
financial plan to the Municipal Finance Advisory Commission for its 26
review and approval.] 27
Sec. 2. Section 7-576f of the general statutes is repealed and the 28
following is substituted in lieu thereof (Effective July 1, 2024): 29
(a) (1) A municipality designated as a tier I municipality in 30
accordance with section 7-576a, as amended by this act, shall retain such 31
designation, notwithstanding any positive changes in the factors 32
leading to its current designation, until the Municipal Finance Advisory 33
Commission, by unanimous vote, terminates such designation based on 34
an evaluation of such municipality's financial condition and financial 35
practices. 36
(2) A municipality designated as a [tier I municipality in accordance 37
with section 7-576a,] tier II municipality in accordance with section 7-38
576b, tier III municipality in accordance with section 7-576c, or tier IV 39
municipality in accordance with section 7-576e, as amended by this act, 40
shall retain such designation, notwithstanding any positive changes in 41
the factors leading to its current designation, until, in the fiscal years 42
following such designation, [(1)] the Municipal Accountability Review 43
Board determines that (A) there have been no audited operating deficits 44
in the general fund of the municipality for two consecutive fiscal years, 45
[(2)] (B) the [municipality's] municipality has a long-term bond rating 46
from one or more bond rating agencies that is investment grade or 47
higher and such bond rating has either improved or remained 48 Raised Bill No. 5472
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unchanged since its most current designation, [(3)] (C) the municipality 49
has presented and the [commission or] board has approved a financial 50
plan that projects a positive fund balance for the three succeeding 51
consecutive fiscal years covered by such financial plan, [where] 52
provided (i) each fiscal year of such plan is based upon recurring 53
revenue and expenses, (ii) a positive fund balance of at least five per cent 54
is projected in the third such fiscal year, [(4)] and (iii) such plan does not 55
include funding received pursuant to sections 7-576i, as amended by 56
this act, or 5-576j, (D) the municipality's audits for such consecutive 57
fiscal years have been completed and [contain no general fund deficit] 58
the general fund reports an audited fund balance of at least five per cent, 59
and (E) there is no evidence that the municipality has engaged in 60
unsound or irregular financial practices in relation to commonly 61
accepted standards in municipal finance. The board may undertake the 62
determination described in this subdivision at its discretion or upon the 63
request of a municipality. 64
(b) [Notwithstanding subsection (a) of this section, the Municipal 65
Finance Advisory Commission may, by unanimous vote, end the 66
designation of a municipality designated as a tier I municipality, based 67
on an evaluation of such municipality's financial condition.] (1) If the 68
Municipal Accountability Review Board determines that a municipality 69
has satisfied the criteria listed in subdivision (2) of subsection (a) of this 70
section, the secretary shall, at the secretary's discretion and in 71
consideration of the fiscal condition of the municipality and best 72
interests of the state, terminate such municipality's tier designation or 73
redesignate such municipality to a lower tier, provided no such 74
municipality shall be redesignated as a tier I municipality. Not later than 75
sixty days after the board makes such determination, the secretary shall 76
notify the municipality of the secretary's decision to terminate such 77
municipality's tier designation or redesignate such municipality to a 78
lower tier. A municipality shall retain its existing tier designation until 79
such notice is received. If the secretary fails to provide such notice prior 80
to the expiration of said sixty-day period, the municipality's tier 81
designation shall be deemed terminated on the sixty-first day following 82 Raised Bill No. 5472
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such determination. 83
(2) A municipality redesignated to a lower tier pursuant to 84
subdivision (1) of this subsection shall (A) meet the requirements of this 85
chapter pertaining to such lower tier, and (B) not request a 86
determination from the Municipal Accountability Review Board 87
pursuant to subdivision (2) of subsection (a) of this section during the 88
one-year period following such redesignation. 89
Sec. 3. Section 7-576i of the general statutes is repealed and the 90
following is substituted in lieu thereof (Effective July 1, 2024): 91
(a) Any designated tier II, III, or IV municipality shall be eligible to 92
receive funding from the Municipal Restructuring Fund, which fund 93
shall be nonlapsing. A designated tier II, III or IV municipality seeking 94
such funds shall submit, for approval by the Secretary of the Office of 95
Policy and Management, a plan detailing its overall restructuring plan, 96
including local actions to be taken and its proposed use of such funds. 97
Notwithstanding section 10-262j, a municipality may, as part of such 98
plan and in consultation with its local board of education, submit a 99
proposed reduction in the minimum budget requirement related to its 100
education budget. The secretary shall consult with the Commissioner of 101
Education in approving or rejecting such proposed reduction. The 102
secretary shall consult with the [municipal accountability review board] 103
Municipal Accountability Review Board in making distribution 104
decisions and attaching appropriate conditions thereto, including the 105
timing of any such distributions and whether such funds shall be 106
distributed in the form of a municipal restructuring fund loan subject to 107
repayment by the municipality. The distribution of such assistance 108
funds shall be based on the relative fiscal needs of the requesting 109
municipalities. The secretary may approve all, none or a portion of the 110
funds requested by a municipality. In attaching conditions to such 111
funding, the secretary shall consider the impact of such conditions on 112
the ability of a municipality to meet legal and other obligations. The 113
board shall monitor and report to the secretary on the use of such funds 114
and adherence to the conditions attached thereto. The secretary shall 115 Raised Bill No. 5472
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develop and issue guidance on the (1) administration of the [municipal 116
restructuring fund] Municipal Restructuring Fund, (2) criteria for 117
participation by municipalities and requirements for plan submission, 118
and (3) prioritization for the awarding of assistance funds pursuant to 119
this section. Any municipality that receives funding from the [municipal 120
restructuring fund] Municipal Restructuring Fund, in addition to the 121
other responsibilities and authority given to the board with respect to 122
designated tiers II, III and IV municipalities, shall be required to receive 123
board approval of its annual budgets. 124
(b) The secretary may distribute funds from the Municipal 125
Restructuring Fund to a third party on behalf of a designated tier II, tier 126
III or tier IV municipality. Funds received by a municipality pursuant to 127
this section may be used to pay an arbitrator selected pursuant to 128
subclause (v) of subdivision (3) of subsection (a) of section 7-576e, as 129
amended by this act. 130
[(b)] (c) Notwithstanding the provisions of subsection (a) of this 131
section, in making distributions from the Municipal Restructuring 132
Fund, the board shall give immediate consideration to any municipality 133
that shall default on debt obligations by January 1, 2018, without an 134
immediate distribution of such funds. 135
Sec. 4. Subdivision (2) of subsection (a) of section 7-576e of the general 136
statutes is repealed and the following is substituted in lieu thereof 137
(Effective July 1, 2024): 138
(2) The Municipal Accountability Review Board may designate a tier 139
III municipality as a tier IV municipality based on a finding by the board 140
that the fiscal condition of such municipality warrants such a 141
designation based upon an evaluation of the following criteria: (A) The 142
balance in the municipal reserve fund; (B) the short and long-term 143
liabilities of the municipality, including, but not limited to, the 144
municipality's ability to meet minimum funding levels required by law, 145
contract or court order; (C) the initial budgeted revenue for the 146
municipality for the past five fiscal years as compared to the actual 147 Raised Bill No. 5472
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revenue received by the municipality for such fiscal years; (D) budget 148
projections for the following five fiscal years; (E) the economic outlook 149
for the municipality; [and] (F) the municipality's access to capital 150
markets; and (G) evidence of unsound or irregular financial practices in 151
relation to commonly accepted standards in municipal finance that the 152
board believes may materially affect the municipality's financial 153
condition. For the purpose of determining whether to make a finding 154
pursuant to this subdivision, the membership of the board shall 155
additionally include the chief elected official of such municipality, the 156
treasurer of such municipality and a member of the legislative body of 157
such municipality, as selected by such body. In conducting a vote on 158
any such determination, the treasurer of such municipality shall be a 159
non-voting member of the board. The board shall submit such finding 160
and recommended designation to the secretary, who shall provide for a 161
thirty-day notice and public comment period related to such finding 162
and recommendation. Following the public notice and comment period, 163
the secretary shall forward the board's finding and recommended 164
designation and a report regarding the comments received in this regard 165
to the Governor. Following the receipt of such documentation from the 166
secretary, the Governor may approve or disapprove the board's 167
recommended designation. 168
Sec. 5. Subdivision (3) of subsection (a) of section 7-576e of the general 169
statutes is repealed and the following is substituted in lieu thereof 170
(Effective July 1, 2024): 171
(3) If any municipality is designated as a tier IV municipality, the 172
following individuals shall serve as ex-officio, nonvoting members of 173
the Municipal Accountability Review Board, provided such additional 174
members shall only serve for purposes of the tier IV municipality that 175
they represent: (A) The chief elected official of such municipality, or the 176
chief elected official's designee, (B) an elected member of the local 177
legislative body of such municipality, or such member's designee, as 178
selected by a majority vote of the local legislative body of such 179
municipality, (C) in the case where the municipality has an elected 180
treasurer, the municipal treasurer or other municipal official responsible 181 Raised Bill No. 5472
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for the issuance of bonds, and (D) a member of the minority party of the 182
municipality's legislative body as elected by such minority party 183
members. Notwithstanding the provisions of sections 7-568 to 7-575, 184
inclusive, and sections 7-576a, as amended by this act, and 7-576b, a 185
municipality designated as a tier IV municipality pursuant to this 186
section shall retain such designation following the issuance of a deficit 187
obligation subsequent to such municipality's designation as a tier IV 188
municipality. With respect to a designated tier IV municipality, the 189
Municipal Accountability Review Board shall have the same powers 190
and responsibilities as it has with respect to designated tier III 191
municipalities in addition to which it shall have the following additional 192
or superseding authority and responsibilities: 193
(i) To review and approve or disapprove the municipality's annual 194
budget, including, but not limited to, the general fund, other 195
governmental funds, enterprise funds and internal service funds. No 196
annual budget, annual tax levy or user fee for the municipality shall 197
become operative until it has been approved by the board. If the board 198
disapproves any annual budget, not later than the May twenty-first 199
prior to the beginning of the new fiscal year, the board shall specify the 200
reasons for such disapproval and shall provide the legislative body until 201
the June fifteenth prior to the beginning of the new fiscal year to 202
resubmit the annual budget in accordance with this section. If the 203
legislative body has not adopted a budget by such June fifteenth date or 204
its resubmitted annual budget is not approved by the board, the board 205
shall adopt an interim budget and establish a tax rate and user fees. Such 206
interim budget shall take effect at the commencement of the fiscal year 207
and shall remain in effect until the municipality submits and the board 208
approves a modified budget. Notwithstanding any provision of the 209
general statutes, or any public or special act, local law, charter or 210
ordinance or resolution, a municipality may approve a modified budget 211
pursuant to this section after any applicable deadline for such adoption 212
has passed. 213
(ii) To review and approve all bond ordinances and bond resolutions 214
of the municipality. 215 Raised Bill No. 5472
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(iii) To monitor compliance with the municipality's five-year financial 216
plan and annual budget and require that the municipality make such 217
changes as are necessary to ensure budgetary balance in such plan and 218
budget. 219
(iv) To approve or reject all collective bargaining agreements for a 220
new term, other than modifications, amendments or reopening of an 221
agreement, to be entered into by the municipality or any of its agencies 222
or administrative units, including the board of education. If it rejects an 223
agreement, the board shall indicate the specific provisions of the 224
proposed agreement present or missing which caused the rejection, as 225
well as its rationale for the rejection. The board may indicate the total 226
cost impact or savings that are acceptable in a new agreement. At any 227
time during negotiations and prior to reaching any agreement, or a 228
modified agreement, the parties, by mutual agreement, may request 229
guidance from the board as to the level and areas of savings that may be 230
acceptable to the board in a new agreement. Following any rejection of 231
a proposed collective bargaining agreement, the parties to the 232
agreement shall have ten days from the date of the board's rejection to 233
consider the board's concerns and propose a modified agreement. After 234
the expiration of such ten-day period, the board shall approve or reject 235
any such modified agreement. If the parties have been unable to reach a 236
modified agreement or the board rejects such modified agreement, the 237
board shall impose binding arbitration on the parties, in accordance 238
with clause (v) of this subdivision, to arbitrate issues identified by the 239
board as the cause for such inability or rejection. In establishing the 240
issues to be arbitrated, as well as in making a determination to reject a 241
proposed agreement, the board shall not be limited to matters raised or 242
negotiated by the parties. Also, to approve or reject all modifications, 243
amendments or reopeners to collective bargaining agreements entered 244
into by the municipality or any of its agencies or administrative units, 245
including the board of education. If it rejects a modification, amendment 246
or reopener to an agreement, the board shall indicate the specific 247
provisions of the proposed modification, amendment or reopener which 248
caused the rejection, as well as its rationale for the rejection. The board 249 Raised Bill No. 5472
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may indicate the total cost impact or savings acceptable in a new 250
modification, amendment or reopener. If the board rejects a proposed 251
amendment or reopener to a collective bargaining agreement, the 252
parties to the agreement shall have ten days from the date of the board's 253
rejection to consider the board's concerns and put forth a revised 254
modification, amendment or reopener. After the expiration of such ten-255
day period, the board shall approve or reject any revised modification, 256
amendment or reopener amendment. If the parties are unable to reach 257
a revised modification, amendment or reopener or the board rejects 258
such revised modification, amendment or reopener, the board shall 259
impose binding arbitration upon the parties in accordance with clause 260
(v) of this subdivision. The issues to be arbitrated shall be those 261
identified by the board as causing such inability or rejection. Prior to the 262
board taking action on any such modification, amendment or reopener, 263
the parties shall have an opportunity to make a presentation to the 264
board. 265
(v) Except as otherwise provided in this subdivision, with respect to 266
collective bargaining agreements of the municipality or any of its 267
agencies or administrative units, including, but not limited to, the board 268
of education, that are in or are subject to binding arbitration, the board 269
shall have the power to impose binding arbitration upon the parties any 270
time after the seventy-fifth day following the commencement of 271
negotiations or to reject any arbitration award pending municipal or 272
board of education action pursuant to section 7-473c or 10-153f on the 273
date the board is established. If, upon the date of a municipality's 274
designation as a tier IV municipality, the parties are in binding 275
arbitration, or if the board rejects a pending arbitration award, the board 276
shall immediately replace any established binding arbitration panel 277
with an arbitrator selected in accordance with this section. If the board 278
imposes binding arbitration or replaces an existing binding arbitration 279
panel, it shall do so with an arbitrator selected by the Governor from a 280
list of three potential arbitrators approved by and submitted to the 281
Governor by the board. Such list of potential arbitrators shall include 282
former judges of the state or federal judicial systems or other persons 283 Raised Bill No. 5472
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who have experience with arbitration or similar proceedings. Prior to 284
the Governor's selection of an arbitrator, the parties may provide 285
recommendations for such selection to the board. The board shall not be 286
limited to selecting arbitrators from those recommended by the parties. 287
The board may reduce the time limits in the applicable provisions of the 288
general statutes or any public or special acts governing binding 289
arbitration by one-half. In imposing such arbitration or in replacing an 290
arbitration panel, the board shall not be limited to consideration and 291
inclusion in the collective bargaining agreement of the last best offers or 292
the matters raised by or negotiated by the parties provided the board 293
shall indicate reasons for raising any matters not negotiated by the 294
parties. The board shall be given the opportunity to make a presentation 295
before the arbitrator. In addition to any statutory factors that shall be 296
considered by the arbitrator with respect to proposed municipal or 297
board of education collective bargaining agreements, the arbitrator shall 298
give highest priority to the short and long-term fiscal exigencies that 299
resulted in the municipality's designation as a tier IV municipality. Not 300
later than ten days after the issuance of any of the arbitrator's decisions 301
on the matters subject to such binding arbitration, the board may 302
request reconsideration of one or more of such decisions and state its 303
position as to the impact of such decisions on the short and long-term 304
fiscal sustainability of the municipality. Not later than five days after the 305
board's request for such reconsideration, the parties may submit 306
comments to the arbitrator in response to the board's stated position. 307
Not later than thirty days following the board's request for such 308
reconsideration, the arbitrator, based on the record of the arbitration, 309
may either modify or maintain the original arbitration decisions. The 310
arbitrator's decisions shall be binding upon the parties. With respect to 311
collective bargaining agreements negotiated pursuant to section 10-312
153d and arbitration awards issued pursuant to section 10-153f, the 313
provisions of this subdivision shall not apply until the board has 314
rejected such agreement or award pursuant to subdivision (7) of 315
subsection (b) of section 7-576d on two occasions. No collective 316
bargaining agreement that requires the approval of the board shall be 317
deemed approved solely due to the board's failure to act within a 318 Raised Bill No. 5472
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specified period of time. 319
Sec. 6. Section 7-393 of the general statutes is repealed and the 320
following is substituted in lieu thereof (Effective July 1, 2024): 321
Upon the completion of an audit, the independent auditor shall file 322
certified copies of the audit report with (1) the appointing authority, (2) 323
in the case of a town, city or borough, with the clerk of such town, city 324
or borough, (3) in the case of a regional school district, with the clerks of 325
the towns, cities or boroughs in which such regional school district is 326
located and with the board of education, (4) in the case of an audited 327
agency, with the clerks of the towns, cities or boroughs in which such 328
audited agency is located, and (5) in each case, with the Secretary of the 329
Office of Policy and Management. Such copies shall be filed within six 330
months from the end of the fiscal year of the municipality, regional 331
school district or audited agency, but the secretary may grant an 332
extension of not more than thirty days, provided the auditor making the 333
audit and the chief executive officer of the municipality, regional school 334
district or audited agency shall jointly submit a request in writing to the 335
secretary stating the reasons for such extension at least thirty days prior 336
to the end of such six-month period. If the reason for the extension 337
relates to deficiencies in the accounting system of the municipality, 338
regional school district or audited agency the request must be 339
accompanied by a corrective action plan. The secretary may, after a 340
hearing with the auditor and officials of the municipality, regional 341
school district or audited agency, grant an additional extension if 342
conditions warrant, provided such extension shall not exceed six 343
months from the date the auditor was required to file such copies. Said 344
auditor shall preserve all of his or her working papers employed in the 345
preparation of any such audit until the expiration of [three] five years 346
from the date of filing a certified copy of the audit with the secretary 347
and such working papers shall be available, upon written request and 348
upon reasonable notice from the secretary, during such time for 349
inspection by the secretary or his authorized representative, at the office 350
or place of business of the auditor, during usual business hours. Any 351
municipality, regional school district, audited agency or auditor who 352 Raised Bill No. 5472
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fails to have the audit report filed on its behalf within six months from 353
the end of the fiscal year or within the time granted by the secretary shall 354
be referred by the secretary to the Municipal Finance Advisory 355
Commission established pursuant to section 7-394b, assessed a civil 356
penalty of not less than one thousand dollars but not more than [ten] 357
fifty thousand dollars or both, except that the secretary may waive such 358
penalties if, in the secretary's opinion, there appears to be reasonable 359
cause for not having completed or provided the required audit report, 360
provided an official of the municipality, regional school district or 361
audited agency or the auditor submits a written request for such waiver. 362
The secretary may impose any civil penalty assessed pursuant to this 363
section against a municipality, regional school district or audited agency 364
in the form of a reduction in the amount of one or more grants awarded 365
by the secretary, including, but not limited to, any grant payable 366
pursuant to section 12-18b. 367
This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2024 7-576a
Sec. 2 July 1, 2024 7-576f
Sec. 3 July 1, 2024 7-576i
Sec. 4 July 1, 2024 7-576e(a)(2)
Sec. 5 July 1, 2024 7-576e(a)(3)
Sec. 6 July 1, 2024 7-393
Statement of Purpose:
To amend certain conditions and procedures for changing the tier
designation of municipalities referred to the Municipal Finance
Advisory Commission and Municipal Accountability Review Board,
specify that the Municipal Accountability Review Board's failure to
approve certain collective bargaining agreements will not cause such
agreements to be deemed approved, and authorize the Secretary of the
Office of Policy and Management to impose certain penalties as
reductions to grant awards.
[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.]