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General Assembly Substitute Bill No. 5472
February Session, 2024
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 Section 7-576a of the general statutes is repealed and the 1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
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 Substitute Bill No. 5472
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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 Section 7-576f of the general statutes is repealed and the 28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
[(a)] (2) A municipality designated as a [tier I municipality in 37
accordance with section 7-576a,] tier II municipality in accordance with 38
section 7-576b, tier III municipality in accordance with section 7-576c, or 39
tier IV municipality in accordance with section 7-576e, as amended by 40
this act, shall retain such designation, notwithstanding any positive 41
changes in the factors leading to its current designation, until, in the 42
fiscal years following such designation, [(1)] the Municipal 43
Accountability Review Board determines that (A) there have been no 44
audited operating deficits in the general fund of the municipality for 45
two consecutive fiscal years, [(2)] (B) the [municipality's] municipality 46
has a long-term bond rating from one or more bond rating agencies that 47
is investment grade or higher and such bond rating has either improved 48
or remained unchanged since its most current designation, [(3)] (C) the 49
municipality has presented and the [commission or] board has 50
approved a financial plan that projects a positive fund balance for the 51 Substitute Bill No. 5472
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three succeeding consecutive fiscal years covered by such financial plan, 52
[where] provided (i) each fiscal year of such plan is based upon 53
recurring revenue and expenses, (ii) a positive fund balance of at least 54
five per cent is projected in the third such fiscal year, [and (4)] and (iii) 55
such plan does not include funding received pursuant to section 7-576i, 56
as amended by this act, or 7-576j, (D) the municipality's audits for such 57
consecutive fiscal years have been completed and [contain no general 58
fund deficit] the general fund reports an audited fund balance of at least 59
five per cent, and (E) there is no evidence that the municipality has 60
engaged in unsound or irregular financial practices in relation to 61
commonly accepted standards in municipal finance. The board may 62
undertake the determination described in this subdivision at its 63
discretion or upon the 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
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 Substitute Bill No. 5472
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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
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 Substitute Bill No. 5472
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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, in part, to pay an arbitrator selected pursuant 128
to clause (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
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 Substitute Bill No. 5472
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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. Section 7-393 of the general statutes is repealed and the 169
following is substituted in lieu thereof (Effective July 1, 2024): 170
Upon the completion of an audit, the independent auditor shall file 171
certified copies of the audit report with (1) the appointing authority, (2) 172
in the case of a town, city or borough, with the clerk of such town, city 173
or borough, (3) in the case of a regional school district, with the clerks of 174
the towns, cities or boroughs in which such regional school district is 175
located and with the board of education, (4) in the case of an audited 176
agency, with the clerks of the towns, cities or boroughs in which such 177
audited agency is located, and (5) in each case, with the Secretary of the 178
Office of Policy and Management. Such copies shall be filed within six 179
months from the end of the fiscal year of the municipality, regional 180
school district or audited agency, but the secretary may grant an 181
extension of not more than thirty days, provided the auditor making the 182
audit and the chief executive officer of the municipality, regional school 183
district or audited agency shall jointly submit a request in writing to the 184
secretary stating the reasons for such extension at least thirty days prior 185 Substitute Bill No. 5472
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to the end of such six-month period. If the reason for the extension 186
relates to deficiencies in the accounting system of the municipality, 187
regional school district or audited agency the request must be 188
accompanied by a corrective action plan. The secretary may, after a 189
hearing with the auditor and officials of the municipality, regional 190
school district or audited agency, grant an additional extension if 191
conditions warrant, provided such extension shall not exceed six 192
months from the date the auditor was required to file such copies. Said 193
auditor shall preserve all of his or her working papers employed in the 194
preparation of any such audit until the expiration of [three] five years 195
from the date of filing a certified copy of the audit with the secretary 196
and such working papers shall be available, upon written request and 197
upon reasonable notice from the secretary, during such time for 198
inspection by the secretary or his authorized representative, at the office 199
or place of business of the auditor, during usual business hours. Any 200
municipality, regional school district, audited agency or auditor who 201
fails to have the audit report filed on its behalf within six months from 202
the end of the fiscal year or within the time granted by the secretary shall 203
be referred by the secretary to the Municipal Finance Advisory 204
Commission established pursuant to section 7-394b, assessed a civil 205
penalty of not less than one thousand dollars but not more than [ten] 206
fifty thousand dollars or both, except that the secretary may waive such 207
penalties if, in the secretary's opinion, there appears to be reasonable 208
cause for not having completed or provided the required audit report, 209
provided an official of the municipality, regional school district or 210
audited agency or the auditor submits a written request for such waiver. 211
The secretary may impose any civil penalty assessed pursuant to this 212
section against a municipality, regional school district or audited agency 213
in the form of a reduction in the amount of one or more grants awarded 214
by the secretary, including, but not limited to, any grant payable 215
pursuant to section 12-18b. 216
This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2024 7-576a Substitute Bill No. 5472
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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 7-393
Statement of Legislative Commissioners:
In Section 2(C)(iii), "5-576j" was changed to "7-576j" for accuracy.
PD Joint Favorable Subst.