HB3708 EngrossedLRB103 26193 AWJ 52552 b

1    AN ACT concerning local government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Municipal Code is amended by
5changing Sections 8-12-2, 8-12-3, 8-12-4, and 8-12-23 and by
6adding Sections 8-12-4.5, 8-12-10.5, and 8-12-21.5 as follows:
 
7    (65 ILCS 5/8-12-2)  (from Ch. 24, par. 8-12-2)
8    Sec. 8-12-2. (a) Pursuant to the authority of the General
9Assembly to provide for the public health, safety and welfare,
10the General Assembly hereby finds and declares that it is the
11public policy and a public purpose of the State to offer
12assistance to a financially distressed city so that it may
13provide for the health, safety and welfare of its citizens,
14pay when due principal and interest on its debt obligations,
15meet financial obligations to its employees, vendors and
16suppliers, and provide for proper financial accounting
17procedures, budgeting and taxing practices, as well as
18strengthen the human and economic development of the city.
19    (b) It is the purpose of this Division to provide a secure
20financial basis for the continued operation of a financially
21distressed city. The intention of the General Assembly, in
22enacting this legislation is to establish sound, efficient and
23generally accepted accounting, budgeting and taxing procedures

 

 

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1and practices within a financially distressed city, to provide
2powers to a financial advisory authority established for a
3financially distressed city, and to impose restrictions upon a
4financially distressed city in order to assist that city in
5assuring its financial integrity while leaving municipal
6services policies to the city, consistent with the
7requirements for satisfying the public policy and purposes
8herein set forth.
9    (c) It also is the purpose of this Division to authorize a
10city which has been certified and designated as a financially
11distressed city under the procedure set forth in Section
128-12-4, and which has by ordinance requested that a financial
13advisory authority be appointed for the city and that the city
14receive assistance as provided in this Division, and which has
15filed certified copies of that ordinance in the manner
16provided by Section 8-12-4, to enter into such agreements as
17are necessary to receive assistance as provided in this
18Division and in applicable provisions of the Illinois Finance
19Authority Act.
20(Source: P.A. 93-205, eff. 1-1-04.)
 
21    (65 ILCS 5/8-12-3)  (from Ch. 24, par. 8-12-3)
22    Sec. 8-12-3. As used in this Division:
23    (1) "Authority" means the "(Name of Financially Distressed
24City) Financial Advisory Authority".
25    (2) "Financially distressed city" means a home rule any

 

 

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1municipality which is a home rule unit and which (i) is
2certified and designated by the Department of Revenue as being
3in the highest 5% of all home rule municipalities in terms of
4the aggregate of the rate per cent of all taxes levied pursuant
5to statute or ordinance upon all taxable property of the
6municipality and as being in the lowest 5% of all home rule
7municipalities in terms of per capita tax yield, and (ii) is
8designated by joint resolution of the General Assembly as a
9financially distressed city under Section 8-12-4.
10    (3) "Home rule municipality" means a municipality which is
11a home rule unit as provided in Section 6 of Article VII of the
12Illinois Constitution.
13    (4) "Budget" means an annual appropriation ordinance or
14annual budget as described in Division 2 of Article 8, as from
15time to time in effect in the financially distressed city.
16    (5) "Chairperson" means the chairperson of the Authority
17appointed pursuant to Section 8-12-7.
18    (6) "Financial Plan" means the financially distressed
19city's financial plan as developed pursuant to Section
208-12-15, as from time to time in effect.
21    (7) "Fiscal year" means the fiscal year of the financially
22distressed city.
23    (8) "Obligations" means bonds, notes or other evidence of
24indebtedness issued by the Illinois Finance Authority in
25connection with the provision of financial aid to a
26financially distressed city pursuant to this Division and

 

 

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1applicable provisions of the Illinois Finance Authority Act.
2(Source: P.A. 93-205, eff. 1-1-04.)
 
3    (65 ILCS 5/8-12-4)  (from Ch. 24, par. 8-12-4)
4    Sec. 8-12-4. Certification and designation as financially
5distressed city.
6    (a) In order to be certified as a financially distressed
7city and receive assistance as provided in this Division: ,
8        (1) a home rule municipality shall first, by ordinance
9    passed by its corporate authorities, request (i) that the
10    Department of Revenue certify that it is in the highest 5%
11    of all home rule municipalities in terms of the aggregate
12    of the rate per cent of all taxes levied pursuant to
13    statute or ordinance upon all taxable property of the
14    municipality and in the lowest 5% of all home rule
15    municipalities in terms of per capita tax yield, and (ii)
16    that the General Assembly by joint resolution designate it
17    as a financially distressed city. A home rule municipality
18    which is so certified and designated as a financially
19    distressed city and which desires to receive assistance as
20    provided in this Division shall, by ordinance passed by
21    its corporate authorities, request that a financial
22    advisory authority be appointed for the city and that the
23    city receive assistance as provided in this Division, and
24    shall file a certified copy of that ordinance with the
25    Governor, with the Clerk of the House of Representatives

 

 

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1    and with the Secretary of the Senate; or .
2        (2) the State Comptroller may conduct a preliminary
3    review to determine the existence of probable financial
4    stress within a home rule municipality if one or more of
5    the following occur:
6            (A) the State Comptroller requests that the
7        Department of Revenue certify that the municipality is
8        in the highest 5% of all home rule municipalities in
9        terms of the aggregate of the rate per cent of all
10        taxes levied pursuant to statute or ordinance upon all
11        taxable property of the municipality and in the lowest
12        5% of all home rule municipalities in terms of per
13        capita tax yield, and the Department certifies the
14        same;
15            (B) the city council or the mayor of a
16        municipality or school board makes a written request
17        for a preliminary review and that request identifies
18        the existing or anticipated financial conditions or
19        events that make the request necessary;
20            (C) the State Comptroller receives a written
21        request from a creditor with an undisputed claim
22        against the municipality that exceeds the greater of
23        $10,000 or 1% of the annual general fund budget of the
24        municipality and that remains unpaid 6 months after
25        its due date provided that the creditor notifies the
26        municipality in writing at least 30 days before its

 

 

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1        request to the State Comptroller of its intention to
2        submit a written request under this paragraph;
3            (D) the State Comptroller receives, not earlier
4        than 60 days before the next municipal election, a
5        petition containing specific allegations of municipal
6        financial distress signed by at least 25% of the
7        electors within the municipality who voted at the last
8        general election at which a Governor was elected;
9            (E) the State Comptroller receives written
10        notification that a municipality has not timely
11        deposited its minimum obligation payment to the
12        municipality's pension fund as required by law;
13            (F) the State Comptroller receives written
14        notification that the municipality has failed for a
15        period of 7 days or more after the scheduled date of
16        payment to pay wages and salaries or other
17        compensation owed to employees or benefits owed to
18        retirees;
19            (G) the State Comptroller receives written
20        notification from a trustee, paying agent, bondholder,
21        or auditor engaged by the municipality of a default in
22        a bond or note payment or a violation of one or more
23        bond or note covenants;
24            (H) the State Comptroller receives a resolution
25        from either chamber of the General Assembly requesting
26        a preliminary review;

 

 

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1            (I) the municipality is delinquent in the
2        distribution of tax revenues, as required by law, that
3        it has collected for another taxing jurisdiction, and
4        that taxing jurisdiction requests a preliminary
5        review;
6            (J) the municipality has been assigned a long-term
7        debt rating within or below the BBB category or its
8        equivalent by one or more nationally recognized credit
9        rating agencies; or
10            (K) the existence of other facts or circumstances
11        that, in the State Comptroller's sole discretion, are
12        indicative of probable financial stress.
13        Before commencing the preliminary review under this
14    paragraph (2), the State Comptroller shall provide the
15    municipality written notification that he or she intends
16    to conduct a preliminary review. Elected and appointed
17    officials of the municipality shall promptly and fully
18    provide the assistance and information requested by the
19    State Comptroller for that municipality in conducting the
20    preliminary review. The State Comptroller shall provide a
21    preliminary report of his or her findings to the
22    municipality within 20 days after the date the preliminary
23    review begins. A copy of the preliminary report shall be
24    provided to each State Senator and State Representative
25    who represents that municipality. The municipality may
26    provide comments to the State Comptroller concerning the

 

 

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1    preliminary report within 5 days after the preliminary
2    report is provided to the municipality.
3        If the State Comptroller believes there is probable
4    financial stress after his or her preliminary review and
5    any input from the municipality, the State Comptroller
6    shall establish a review team under Section 8-12-4.5. A
7    copy of the preliminary report shall be provided to the
8    review team and each State Senator and State
9    Representative who represents that municipality, and the
10    review shall be posted on the State Comptroller's website.
11    The review team shall examine the financial situation of
12    the municipality and complete a final report as provided
13    in Section 8-12-4.5.
14        If the Governor believes that probable financial
15    stress exists for the municipality to be certified as a
16    financially distressed city under this Section after
17    reviewing a final report prepared under Section 8-12-4.5,
18    the Governor may, by proclamation, certify and designate
19    the municipality as a financially distressed city and
20    authorize appointment of the municipality's Authority
21    under Section 8-12-7. The proclamation shall be filed with
22    the Secretary of State and the corporate authorities of
23    the municipality.
24    (b) Upon the filing of the certified copies of the that
25ordinance under paragraph (1) of subsection (a) or upon the
26written proclamation by the Governor filed with the Secretary

 

 

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1of State and corporate authorities of a municipality under
2paragraph (2) of subsection (a), as required by this Section
3this Division and all of its provisions shall then and
4thereafter be applicable to the financially distressed city,
5shall govern and control its financial accounting, budgeting
6and taxing procedures and practices, and, subject to the
7limitations of subsection (a) of Section 8-12-22, shall remain
8in full force and effect with respect thereto until such time
9as the financial advisory authority established under Section
108-12-5 is abolished as provided in subsection (c) of Section
118-12-22.
12(Source: P.A. 86-1211.)
 
13    (65 ILCS 5/8-12-4.5 new)
14    Sec. 8-12-4.5. Review team powers and duties.
15    (a) If the State Comptroller believes there is probable
16financial stress after his or her preliminary review and any
17input from the municipality under Section 8-12-4, the State
18Comptroller shall establish a review team for the municipality
19consisting of: the State Comptroller, or his or her designee;
20the Director of the Governor's Office of Management and
21Budget, or his or her designee; a member appointed by the
22Senate President; a member appointed by the Minority Leader of
23the Senate; a member appointed by the Speaker of the House of
24Representatives; and a member appointed by the Minority Leader
25of the House of Representatives. The State Comptroller may

 

 

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1appoint other State officials or other persons with relevant
2professional experience to serve on the review team. The State
3Comptroller shall provide administrative support and other
4support to a review team established under this Section.
5    (b) In conducting its review, the review team may:
6        (1) examine the books and records of the municipality;
7        (2) use the services of other State agencies and
8    employees in conducting the financial review; or
9        (3) both examine the books and records of the
10    municipality and use the services of other State agencies
11    and employees in conducting the financial review.
12    The review team shall meet with city council and employees
13of the municipality as part of its review. At this meeting, the
14review team shall receive, discuss, and consider information
15provided by the municipality concerning the financial
16condition of the municipality. In addition, the review team
17shall hold at least one public meeting in the jurisdiction of
18the municipality at which the public may provide comments.
19    (c) The review team shall submit a written final report of
20its findings to the State Comptroller within 60 days following
21its establishment or earlier if required by the State
22Comptroller. Upon request of a majority of the review team,
23the State Comptroller may grant one 30-day extension to the
2460-day limitation. A copy of the final report shall be
25forwarded by the State Comptroller to the Governor, mayor and
26city council of the municipality, the Speaker of the House of

 

 

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1Representatives, the Senate President, and each State Senator
2and State Representative who represents the municipality. The
3final report shall be posted on the State Comptroller's
4website within 7 days after the final report is submitted to
5the Governor. The final report shall identify the existence,
6or an indication of the likely occurrence, of any of the
7following if found:
8        (1) a default in the payment of principal or interest
9    upon bonded obligations, notes, or other municipal
10    securities for which no funds or insufficient funds are on
11    hand and, if required, segregated in a special trust fund;
12        (2) a failure for a period of 30 days or more beyond
13    the due date to transfer one or more of the following to
14    the appropriate agency:
15            (i) taxes withheld on the income of employees;
16            (ii) taxes collected by the municipality as agent
17        for another unit of local government; and
18            (iii) a contribution required by a pension,
19        retirement, or benefit plan;
20        (3) a failure for a period of 7 days or more after the
21    scheduled date of payment to pay wages and salaries or
22    other compensation owed to employees or benefits owed to
23    retirees;
24        (4) the total amount of accounts payable for the
25    current fiscal year, as determined by the State
26    Comptroller, is in excess of 10% of the total expenditures

 

 

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1    of the municipality in that fiscal year;
2        (5) a failure to eliminate an existing deficit in any
3    fund of the municipality within the 2-year period
4    preceding the end of the municipality's fiscal year during
5    which the review team final report is received;
6        (6) a projection of a deficit in the general fund of
7    the municipality for the current fiscal year in excess of
8    5% of the budgeted revenues for the general fund;
9        (7) a failure to comply in all material respects with
10    the terms of an approved deficit elimination plan or an
11    agreement entered into pursuant to a deficit elimination
12    plan;
13        (8) the existence of material loans to the general
14    fund from other municipal funds that are not regularly
15    settled between the funds or that are increasing in scope;
16        (9) the existence after the close of the fiscal year
17    of material recurring, non-budgeted subsidies from the
18    general fund to other major funds;
19        (10) the existence of a structural operating deficit;
20        (11) the use of restricted revenues for purposes not
21    authorized by law;
22        (12) the likelihood that the municipality is or will
23    be unable to pay its obligations within 60 days after the
24    date of the review team's final report; and
25        (13) any other facts and circumstances indicative of a
26    municipal financial emergency.

 

 

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1    (d) The review team shall include one of the following
2conclusions in its final report:
3        (1) a financial emergency does not exist within the
4    municipality; or
5        (2) a financial emergency exists within the
6    municipality.
7    (e) The review team may, with the approval of the State
8Comptroller, appoint an individual or firm to carry out the
9review and submit a report to the review team for approval. The
10State Comptroller may enter into a contract with an individual
11or firm respecting the terms and conditions of the
12appointment.
13    (f) For purposes of this Section:
14        (1) A financial emergency does not exist within a
15    municipality if the final report concludes that none of
16    the factors in subsection (c) exist or are likely to occur
17    within the current or next fiscal year or, if they occur,
18    do not threaten the municipality's capability to provide
19    necessary governmental services essential to public
20    health, safety, and welfare.
21        (2) A financial emergency exists within a municipality
22    if any of the following occur:
23            (A) the final report concludes that one or more of
24        the factors in subsection (c) exist or are likely to
25        occur within the current or next fiscal year and
26        threaten the municipality's current and future

 

 

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1        capability to provide necessary governmental services
2        essential to the public health, safety, and welfare;
3            (B) the municipality has failed to provide timely
4        and accurate information enabling the review team to
5        complete its final report; or
6            (C) the mayor of the municipality concludes in
7        writing to the review team that one or more of the
8        factors in subsection (c) exist or are likely to occur
9        within the current or next fiscal year and threaten
10        the municipality's current and future capability to
11        provide necessary governmental services essential to
12        the public health, safety, and welfare, and the mayor
13        recommends that a financial emergency be declared and
14        the State Comptroller concurs with the recommendation.
 
15    (65 ILCS 5/8-12-10.5 new)
16    Sec. 8-12-10.5. State grants. If a financially distressed
17city or Authority is awarded a State grant, any moneys the
18financially distressed city or Authority would be required to
19match under the grant are waived unless the moneys under the
20grant come from federal moneys that require the match. A
21municipality's status as a financially distressed city may not
22negatively impact a decision of whether or not to award a State
23grant to the municipality or negatively impact the amount of
24moneys received by the municipality from a State grant.
 

 

 

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1    (65 ILCS 5/8-12-21.5 new)
2    Sec. 8-12-21.5. Noncompliance by corporate authorities or
3employees of a municipality. If a financially distressed city,
4including its corporate authorities or employees, materially
5violates the requirements of this Division, the Authority may
6commence action in the circuit court within any county in
7which the municipality is located if the Authority has given
8the corporate authorities of the city written notice that
9includes: a detailed explanation of the material violation; a
10statement of the Authority's intention to enforce the
11provisions of this Division by commencing an action; a
12statement giving the corporate authorities at least 15 days to
13correct the violation before the Authority may commence an
14action.
 
15    (65 ILCS 5/8-12-23)  (from Ch. 24, par. 8-12-23)
16    Sec. 8-12-23. A financially distressed city to which this
17Division applies shall remain subject to all other applicable
18provisions of law this Act, except as limited by this
19Division; provided, however, that in case of a conflict
20between the provisions of this Division and any other
21provision of law this Act, the provisions of this Division
22shall control.
23(Source: P.A. 86-1211.)