CHAPTER 117*

MUNICIPAL DEFICIT FINANCING

*See chapter 112 re municipal finance.

Table of Contents

Sec. 7-560. Definitions.

Sec. 7-561. Establishment of property tax intercept procedure and debt service payment fund.

Sec. 7-562. Documentation for issuance of general obligations. Requirements for intercept procedures and debt service payment fund. Percentage or amount of property tax deposited in fund. Fund use.

Sec. 7-563. Indenture or other agreements.

Sec. 7-564. Rights and remedies of holders of general obligations.

Sec. 7-565. State pledge to holders of general obligations.

Sec. 7-566. Municipal petition to become a debtor.

Sec. 7-567. Additional property tax to pay current year’s expenses.

Sec. 7-568. Issuance of deficit obligations to fund general fund deficiency.

Sec. 7-569. Obligation for which there is a special capital reserve fund. State Treasurer’s approval.

Sec. 7-570. Issuance of additional general obligations.

Sec. 7-571. Establishment of special capital reserve fund to secure general obligations.

Sec. 7-572. Application by Tier I municipality to Secretary of Office of Policy and Management for certification to issue general obligations. Regulations.

Sec. 7-573. Requirements for general obligations by Tier I municipality.

Sec. 7-574. Application by tier II municipality to Secretary of Office of Policy and Management for certification to issue general obligations. Regulations.

Sec. 7-575. Requirements for general obligations by tier II municipality.

Sec. 7-576. Referral of tier II municipality to Municipal Finance Advisory Commission. Three-year financial plan. Monthly reports.

Sec. 7-577. Attorney General to apply for writ of mandamus.

Sec. 7-578. Municipal comprehensive economic development plan to increase tax base.

Sec. 7-579. Definition of deficit obligation re town and city of New Haven.

Secs. 7-580 to 7-599. Reserved


Sec. 7-560. Definitions. 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 tier I or tier II municipality.

(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, 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 undesignated 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) “General fund deficiency” means a deficit or a projected fiscal year deficit, or both.

(9) “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 payable from the general fund and is subject to annual appropriation.

(10) “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.

(11) “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.

(12) “Municipal Finance Advisory Commission” means the Municipal Finance Advisory Commission established in section 7-394b.

(13) “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.

(14) “Obligation” means any bond, bond anticipation note, tax 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.

(15) “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.

(16) “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 undesignated general fund balance from the prior fiscal year.

(17) “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.

(18) “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.

(19) “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.

(20) “Secretary” means the Secretary of the Office of Policy and Management.

(21) “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.

(22) “State” means the state of Connecticut.

(23) “Tier I municipality” means any municipality which has applied to and been certified by the secretary as a tier I municipality.

(24) “Tier II municipality” means any municipality which has applied to and been certified by the secretary as a tier II municipality.

(25) “Treasurer” means the Treasurer of the state of Connecticut.

(26) “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.

(P.A. 93-421, S. 1, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-561. Establishment of property tax intercept procedure and debt service payment fund. Any municipality may establish a property tax intercept procedure and a debt service payment fund, as provided in sections 7-562 to 7-564, inclusive. The municipal officer or body empowered to issue general obligations or to determine the details of general obligations authorized by the municipality may establish such tax intercept procedure and such debt service payment fund, may determine the details and approve the terms of all indentures and agreements and other instruments necessary or appropriate to establish and implement a tax intercept procedure and a debt service payment fund as provided in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and may bind the municipality, pursuant to any such indenture or agreement, with the requirements of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and of any ordinance or resolution authorizing the issuance of such general obligations of the municipality.

(P.A. 93-421, S. 2, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-562. Documentation for issuance of general obligations. Requirements for intercept procedures and debt service payment fund. Percentage or amount of property tax deposited in fund. Fund use. (a) Any municipality which proposes to issue general obligations supported by a tax intercept procedure shall deliver to the secretary, together with the notice described in this section, documentation demonstrating that: (1) Such municipality has authorized the issuance of such obligations in accordance with the general statutes, charter, special act or home rule ordinance or the provisions of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive; (2) such municipality has established a property tax intercept procedure and a debt service payment fund with a trustee in accordance with the provisions of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive; and (3) such property tax intercept procedure shall assure that the property tax receipts transferred to the trustee and deposited in the debt service payment fund shall be in an amount at least equal to and deposited by such dates so as to satisfy the debt service payment fund requirement.

(b) Each such property tax intercept procedure and debt service payment fund shall: (1) Take effect immediately upon the issuance of such obligations; (2) provide that all outstanding general obligations of the municipality which have a term of more than one year shall be supported by and paid from debt service payment fund and that property taxes collected by the tax collector of such municipality shall be deposited in such debt service payment fund as provided in subsection (a) of this section; and (3) provide that the tax intercept procedure, the debt service payment fund, any indenture or agreement establishing them, may be amended by the municipality without the consent of any holder of any obligation of the municipality if such amendment does not impair the rights of the holders and is requested by the secretary or the Treasurer.

(c) Prior to the issuance of any general obligation and on or prior to the first day of each fiscal year thereafter, a municipality pursuant to its tax intercept procedure shall determine the percentage or amounts of property taxes to be deposited in such debt service payment fund, the time that such taxes shall be deposited therein and such other terms, conditions and requirements as such municipality shall determine to be in the best interest of the municipality, provided such terms, conditions and requirements shall assure that the debt service payment fund shall have money deposited therein by such dates so as to satisfy, and in amounts equal to or in excess of, the debt service payment requirement. Pursuant to the tax intercept procedure, the chief executive officer of such municipality shall certify to both the tax collector of such municipality and the trustee of the debt service payment requirement, the percentage or amount and the time for deposit of the property taxes therein and such other matters with respect to the operations of the fund as may be required by the tax intercept procedure. Such percentage, amount and time shall be sufficient to assure that the debt service payment fund shall at all times have sufficient moneys available to meet the debt service payment fund requirement. The tax collector shall, immediately upon receipt, remit such property taxes in the percentage or amount and at the time set forth in such certificate to the trustee for deposit in the debt service payment fund. Nothing shall preclude the municipality or its duly authorized officers from causing additional amounts of municipal taxes or other funds to be deposited in the fund.

(d) If the percentage or amount and the time for deposit of the property taxes and such other matters with respect to the operations of the fund as may be required by the tax intercept procedure are not sufficient to meet the debt service payment fund requirement, the trustee and the chief executive officer shall notify the secretary and the Treasurer and thereafter all property taxes of such municipality shall be intercepted by the tax collector and tendered to the trustee for deposit in the debt service payment fund until the moneys deposited therein shall be at least equal to the debt service payment fund requirement.

(e) Funds in the debt service payment fund shall be applied only to pay the outstanding general obligations of the municipality as and when the same shall become due, provided if at any time during any fiscal year, the moneys in the debt service payment fund exceed the debt service payment fund requirement for such fiscal year, the municipality, may instruct the trustee to, and the trustee shall, subject to any restrictions in the tax intercept procedures, pay over to such municipality the amount of such excess for use by the municipality in any manner allowed by law.

(f) The trustee shall from time to time withdraw from the debt service payment fund all amounts required for the payment of debt service on all general obligations of the municipality, as the same shall become due, and shall cause the amounts so withdrawn and disbursed to the paying agents for such general obligations to be applied to such payment.

(g) The debt service payment fund and all moneys or securities therein or payable thereto are hereby declared to be property of the depositing municipality devoted to essential governmental purposes and accordingly shall not be applied to any purpose other than as provided in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and shall not be subject to any order, judgment, lien, execution, attachment, set-off or counterclaim by any creditor of the municipality, except the trustee.

(P.A. 93-421, S. 3, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-563. Indenture or other agreements. The tax intercept procedure and the debt service payment fund shall be established pursuant to an indenture or other agreement between the municipality and the trustee. Such indenture or agreement shall include all the terms, conditions and requirements pertaining to the tax intercept procedure and the debt service payment fund in accordance with the requirements of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and the municipality shall agree to comply with all such terms, conditions and requirements for the benefit of the holders of any general obligations supported by such tax intercept procedure. Such indenture or agreement may also include covenants to pay the fees and expenses of the trustee and to indemnify the trustee from claims against the trustee, covenants of the municipality to protect and safeguard the security and rights of the holders of the obligations issued and sold subject thereto and inclusion of such covenants in the contract of the municipality with such holders and for the benefit of any holders of outstanding general obligations, provided such benefit conferred thereon shall not be deemed to restrict, preclude or otherwise impair any rights that such holders currently may assert and, without limiting said rights, such indenture or agreement shall contain covenants as to: (1) Establishment, maintenance and implementation of both the property tax intercept procedure and the debt service payment fund in a manner such that the municipality can transfer to the trustee for deposit in the debt service payment fund amounts at least equal to the debt service payment fund requirement, and the temporary investment of proceeds of such funds pending their use in accordance with subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and subject to such limitations on investment of public funds otherwise provided for by the general statutes; (2) the appointment, rights, powers and duties of the trustee including limiting or abrogating the rights of the holders of such general obligations to appoint any other trustee and vesting in the trustee all or any such rights, duties and powers; and (3) conditions which would give rise to an event of default under the terms and conditions of such general obligations and actions and remedies which the trustee may take and assert on behalf of such holders. Any requirement set forth in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, pertaining to the tax intercept procedure and debt service payment fund may be modified to the extent necessary to comply with any covenant of the municipality necessary to ensure the exclusion of interest on such obligations from gross income for federal income tax purposes.

(P.A. 93-421, S. 4, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-564. Rights and remedies of holders of general obligations. The holders of general obligations for the benefit of whom the property tax intercept procedure and debt service payment fund is established shall have, in addition to all other rights and remedies under law, the following rights and remedies subject to the terms and conditions of the applicable indenture or agreement with the trustee:

(1) In the event the municipality shall fail or refuse to comply with the indenture or agreement with the trustee or shall default in any contract made with the holders of such general obligations, the holders of twenty-five per cent in aggregate principal amounts of such then outstanding obligations, by instrument or instruments filed with the trustee and proved or acknowledged to the satisfaction of the trustee may cause the trustee to take action for the purposes provided for in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive.

(2) Such trustee may, upon written request of the holders of twenty-five per cent in principal amount of such general obligations then outstanding, in its own name, exercise all or any of the powers of any such holders including: (A) By mandamus or other suit, action or proceeding at law or in equity, enforce all rights of the holders of such general obligations, including requiring the municipality to carry out the provisions of any contract with the holders or any indenture or agreement with the trustee and to perform its duty thereunder; (B) bring suit upon such general obligations; and (C) by action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the holders of such obligations.

(3) Such trustee shall have and possess all of the powers necessary or appropriate for the exercise of any functions specifically set forth in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, or incident to the general representation of the holders of such general obligations of such issue in the enforcement and protection of their rights.

(4) The Superior Court shall have jurisdiction of any suit, action or proceeding by or on behalf of the holders of obligations. The venue of such suit, action or proceeding shall be the judicial district in which such municipality is located.

(P.A. 93-421, S. 5, 22; May 25 Sp. Sess. P.A. 94-1, S. 8, 130.)

History: P.A. 93-421 effective July 1, 1993; May 25 Sp. Sess. P.A. 94-1 made technical change, effective July 1, 1994.

Sec. 7-565. State pledge to holders of general obligations. The state does hereby pledge to and agree with the holders of any general obligations issued under subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and with those parties who may enter into contracts with a municipality pursuant to the provisions of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, that the state will not limit or alter the rights hereby vested in a municipality until such obligations, together with the interest thereon, are fully met and discharged and such contracts are fully performed on the part of the municipality, provided nothing in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, shall preclude limitation or alteration if and when adequate provision shall be made by law for the protection of the holders of such general obligations of a municipality or those entering into such contracts with a municipality. A municipality as agent for the state is authorized to include this pledge and undertaking by the state in such general obligations.

(P.A. 93-421, S. 6, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-566. Municipal petition to become a debtor. No municipality shall file a petition to become a debtor under Chapter 9 of Title 11 of the United States Code without the express prior written consent of the Governor. If the Governor consents to a petition, he shall submit a report to the Treasurer and the joint standing committee of the General Assembly having cognizance of matters relating to finance, revenue and bonding which sets forth the reasons for consent.

(P. A. 93-421, S. 7, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-567. Additional property tax to pay current year’s expenses. If during any fiscal year any municipality determines that it has failed to levy necessary taxes or to levy a tax which, in addition to all other estimated yearly income of such municipality is sufficient to pay the current expenses of such municipality for such fiscal year, the board with the powers to levy taxes for such municipality may levy a tax or additional tax upon its grand list applicable for such fiscal year for the amount sufficient to pay its current year’s expenses and determine the due date of such tax levy.

(P. A. 93-421, S. 8, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-568. Issuance of deficit obligations to fund general fund deficiency. (a) Except as expressly provided in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, no municipality shall issue any deficit obligation to fund a general fund deficiency.

(b) Notwithstanding any charter, special act or home-rule ordinance to the contrary, any municipality which has no outstanding deficit obligation and which has not issued a deficit obligation in the past five years, is authorized and empowered to issue deficit obligations to fund a deficit, provided such municipality shall, within the time and in the manner prescribed by regulations adopted by the secretary, in consultation with the Treasurer: (1) Notify the secretary of its intent to issue such deficit obligations, (2) provide the secretary with the documentation required under subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, (3) establish a property tax intercept procedure, and (4) establish and covenant to maintain with a trustee a debt service payment fund into which the property tax receipts shall be deposited pursuant to the property tax intercept procedure in an amount at least equal to the debt service payment requirement and from which the trustee shall disburse funds to pay debt service on all general obligations of such municipality which have a term of over one year as and when the same shall become due. The secretary shall refer to the Municipal Finance Advisory Commission, pursuant to the provisions of section 7-395, any municipality which notifies the secretary that it intends to issue deficit obligations under this section.

(P.A. 93-421, S. 9, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-569. Obligation for which there is a special capital reserve fund. State Treasurer’s approval. No municipality, including any certified municipality, shall issue any obligation for which there is a special capital reserve fund of any kind which is in any way contributed to or guaranteed by the state unless and until such obligation, and the indenture or agreement establishing such special capital reserve fund, is approved by the Treasurer. The approval of the Treasurer shall be based on documentation provided and certified by such municipality demonstrating to the Treasurer’s satisfaction that (1) the secretary has certified the municipality, (2) the Municipal Finance Advisory Commission in the case of a tier II municipality, has approved the obligation to be issued under subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, (3) the municipality is not in default on any general obligation after giving effect to an obligation approved under this section, (4) the municipality has funded or made due provision to fund the special capital reserve fund, (5) the financing is in the public interest, and (6) the secretary and the Treasurer have approved the property tax intercept procedure authorized by subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive.

(P.A. 93-421, S. 10, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-570. Issuance of additional general obligations. Any certified municipality which has authorized the issue of its general obligations and proposed to issue and secure such general obligations by a special capital reserve fund is hereby empowered to authorize and issue additional general obligations in the manner described in this section, solely for the purposes and in such amounts as are necessary (1) to fund all or a portion of such special capital reserve fund and (2) to pay all or a portion of the costs of issuing such authorized general obligations and such additional general obligations. Such additional general obligations and the appropriation of the proceeds thereof shall be authorized by a resolution adopted by a majority of all the members of the legislative body of the municipality, which for purposes of this section shall mean the body described below, notwithstanding the provisions of any general statute, special act, charter, special act charter, home-rule ordinance, local ordinance or local law governing the authorization of bonds or other obligations of such municipality or the appropriation of the proceeds thereof, all of which provisions are hereby superseded solely for the purposes of this section, including, but not limited to, any public hearing requirement, referendum approval requirement, referendum petition requirement, or recommendation or approval by any official, board, commission, agency, town meeting, representative town meeting, board of finance or other entity. The legislative body of the municipality empowered to authorize such additional obligations shall mean (A) the board of selectmen in any town without a charter, (B) the board of selectmen, council, board of directors, board of aldermen or board of burgesses in any municipality with a charter, (C) the board of education in any regional school district, (D) the city council in any unconsolidated city, (E) the board of burgesses in any unconsolidated borough, and (F) the board of directors or similar body in any other municipality. Notwithstanding any provision of a local law, ordinance, charter, special act charter, home-rule ordinance or the provisions of any bond authorizing ordinance or resolution, a certified municipality’s obligations may be sold at public sale on sealed proposal, by negotiation or by private placement in such manner at such price or prices, at such time or times and on such terms or conditions as the Treasurer determines to be in the best interest of the municipality and the state. Any certified municipality which issues general obligations under subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, shall transfer bond proceeds and such other funds to the special capital reserve fund in the amount necessary to cause the amount of money in the special capital reserve fund to equal the maximum required capital reserve and to maintain therein an amount equal to the maximum required capital reserve.

(P.A. 93-421, S. 11, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-571. Establishment of special capital reserve fund to secure general obligations. (a) Any certified municipality may establish a special capital reserve fund to secure general obligations with a term of more than one year issued pursuant to subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive. The special capital reserve fund shall be established pursuant to an indenture or other agreement between the municipality and the trustee. Such indenture or agreement shall include all the terms, conditions and requirements pertaining to the special capital reserve fund in accordance with the requirements of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, any requirements imposed by the secretary or the Treasurer, and any requirements imposed by the ordinance or resolution authorizing the issuance of such general obligations, and the municipality shall agree to comply with all such terms, conditions and requirements for the benefit of the holders of any general obligations supported by such special capital reserve fund and for the benefit of the state. Such indenture or agreement may also include covenants to pay the fees and expenses of the trustee and to indemnify the trustee against claims against the trustee and any other provisions which the municipality determines are necessary or appropriate to secure general obligations. The municipal officer or body empowered to issue such general obligations or to determine the details of such general obligations authorized by the municipality may establish such capital reserve fund and may determine the details and approve the terms of all indentures and agreements and other instruments necessary or appropriate to establish and implement such special capital reserve fund as provided in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and may bind the municipality pursuant to any such indenture or agreement.

(b) The special capital reserve fund shall consist of (1) bond proceeds and other moneys of the municipality available to be deposited therein and (2) any money made available therefor by the state in accordance with this section. All moneys held in the special capital reserve fund, except as hereinafter provided, shall be used to pay interest due and owing in respect of general obligations of the municipality secured by such special capital reserve fund and for the redemption and retirement of such general obligations as they mature or become due pursuant to any sinking fund redemption provisions, or for the redemption and retirement of such general obligations pursuant to any refinancing or refunding provided any such refinancing or refunding obligations are not supported by any special capital reserve fund and any amounts in such special capital reserve fund are first applied to repay to the state any amounts which the state has paid or deposited in the special capital reserve fund and which the municipality has not repaid to the state. Income and interest from the investment of moneys in the special capital reserve fund shall be retained therein to meet any deficiencies in the maximum required capital reserve. Any amounts in excess of the maximum required capital reserve may be transferred first to the state in an amount equal to the aggregate amount transferred by the state for deposit in the special capital payment fund minus the aggregate amount of all previous reimbursements to the state, second to the debt service payment fund until the moneys in the debt service reserve fund equal or exceed the debt service payment requirement, and third to the municipality. Notwithstanding any provisions of this section, no municipality shall issue an obligation secured by a special capital reserve fund unless and until there is in the special capital reserve fund moneys and investments in an aggregate amount equal to the maximum required capital reserve, after giving effect to such obligations being issued. Any municipality may appropriate and deposit bond proceeds into the special capital reserve fund to bring the amount of money and investments therein to the maximum required capital reserve. Any requirement set forth in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, pertaining to the special capital reserve fund may be modified to the extent necessary to comply with any covenant of the municipality necessary to ensure the exclusion of interest on general obligations of the municipality supported by the special capital reserve fund from gross income for federal income tax purposes. On or before December first of each year, there is deemed to be appropriated from the state General Fund such sums, if any, as shall be certified by the chief executive officer of a certified municipality to the secretary, the Treasurer and the Municipal Finance Advisory Commission as necessary to restore special capital reserve fund to an amount equal to the minimum required capital reserve, and such amounts shall be allotted and paid from the General Fund of the state to the trustee for deposit in the special capital reserve fund. Such amounts, if any, shall be repaid by the municipality to the state and credited to the General Fund as soon as possible, from any moneys available therefor. For purposes of valuation of the special capital reserve fund, securities acquired as an investment for such fund shall be valued at par, actual cost to the certified municipality or market value, whichever value is lower.

(P.A. 93-421, S. 12, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-572. Application by Tier I municipality to Secretary of Office of Policy and Management for certification to issue general obligations. Regulations. Any municipality that desires to issue general obligations under section 7-573 shall apply to the secretary for certification. The secretary may certify as a Tier I municipality any municipality which applies to be certified, provided such municipality (1) has a long-term bond rating from at least one bond rating agency which is investment grade or higher, (2) is unable to secure municipal bond insurance from any bond insurance company on reasonable terms and conditions on the date the secretary certifies such municipality, and (3) otherwise meets the standards established by the secretary. Such standards shall be adopted as regulations by the secretary, in consultation with the Treasurer, and shall provide for a level of supervision over such municipality which the secretary deems to be sufficient to minimize the risk of a draw upon the special capital reserve fund and a transfer from the state General Fund. The secretary may recertify and decertify any municipality then certified, provided the secretary shall not automatically decertify any municipality which is able to secure bond insurance after it has been certified by the secretary.

(P.A. 93-421, S. 13, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-573. Requirements for general obligations by Tier I municipality. Any Tier I municipality may issue general obligations with a term of more than one year which are supported by a special capital reserve fund, but not general obligations to fund a general fund deficiency, as provided in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive. Any such Tier I municipality shall, within the time and in the manner prescribed by regulations adopted by the secretary, in consultation with the Treasurer: (1) Notify the secretary of its intent to issue such obligations, (2) provide the secretary with the documentation required under subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, (3) establish a property tax intercept procedure and debt service payment fund in accordance with the provisions of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and (4) comply with sections 7-569 to 7-571, inclusive. The secretary shall refer to the Municipal Finance Advisory Commission, pursuant to the provisions of section 7-395, any municipality which notifies the secretary that it intends to issue obligations under this section.

(P.A. 93-421, S. 14, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-574. Application by tier II municipality to Secretary of Office of Policy and Management for certification to issue general obligations. Regulations. Any municipality that desires to issue general obligations under section 7-575 shall apply to the secretary for certification. The secretary may certify as a tier II municipality any municipality which applies to be certified to issue a general obligation authorized by subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, provided such municipality (1) has a long-term bond rating from at least one bond rating agency which is investment grade or higher, (2) is unable to obtain municipal bond insurance from any bond insurance company on reasonable terms and conditions on the date the secretary certifies such municipality, (3) has not issued a deficit obligation in the last five years, (4) has no deficit obligations outstanding, and (5) otherwise meets the standards established by the secretary. Such standards shall be adopted as regulations by the secretary, in consultation with the Treasurer, and shall provide for a level of supervision over such municipality which the secretary deems to be sufficient to minimize the risk of a draw upon the special capital reserve fund and a transfer from the state General Fund. The secretary may recertify and decertify any municipality then certified, provided the secretary shall not automatically decertify any municipality which is able to secure bond insurance after it has been certified by the secretary.

(P.A. 93-421, S. 15, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-575. Requirements for general obligations by tier II municipality. Any tier II municipality may issue general obligations with a term of more than one year which are supported by a special capital reserve fund, including general obligations to fund a deficit, as provided in subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, provided no municipality shall issue an obligation with a term of more than one year to fund a projected fiscal year deficit. Any such tier II municipality shall, within the time and in the manner prescribed by regulations adopted by the secretary, in consultation with the Treasurer: (1) Notify the secretary of its intent to issue such obligations, (2) provide the secretary with the documentation required under subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, (3) establish a property tax intercept procedure and debt service payment fund in accordance with the provisions of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and (4) comply with sections 7-569 to 7-571, inclusive. The secretary shall refer to the Municipal Finance Advisory Commission, pursuant to the provisions of section 7-395, any municipality which notifies the secretary that it intends to issue obligations under this section.

(P.A. 93-421, S. 17, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-576. Referral of tier II municipality to Municipal Finance Advisory Commission. Three-year financial plan. Monthly reports. Each tier II municipality shall work with and report to the Municipal Finance Advisory Commission as provided for in this section. The secretary shall refer to the Municipal Finance Advisory Commission any tier II municipality for the purpose of improving the fiscal condition of such municipality. Such municipality shall prepare and present to the Municipal Finance Advisory Commission for its review and approval a three-year financial plan and monthly financial report in the manner prescribed by the Municipal Finance Advisory Commission. In addition, in preparing and adopting its annual budgets, such municipality shall include assumptions respecting state revenues and property tax revenues as approved by the Municipal Finance Advisory Commission. The Municipal Finance Advisory Commission shall approve or disapprove all obligations issued by a tier II municipality pursuant to section 7-575 and this section, inclusive, provided it shall only approve such obligations which in its judgment improve the financial condition of such municipality.

(P.A. 93-421, S. 18, 22.)

History: P.A. 93-421 effective July 1, 1993.

Sec. 7-577. Attorney General to apply for writ of mandamus. (a) The Attorney General may apply for a writ of mandamus on behalf of the commission, acting through its chairperson, requiring any official, employee or agent of the municipality to carry out and give effect to any determination of the commission authorized by subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, and any obligation by a municipality to repay to the state any amounts the state pays into a special capital reserve fund and compliance by a municipality with any agreements or indenture pertaining to a special capital reserve fund or tax intercept procedure or debt service payment fund related thereto. Each such application shall be filed in superior court for the judicial district of Hartford.

(b) The superior court for the judicial district of Hartford may, by application of the secretary, the commission or the Attorney General, enforce, by appropriate decree or process, any provisions of subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive, or any act or determination of the commission rendered pursuant to subsection (a) of section 7-394b and sections 7-560 to 7-579, inclusive.

(P.A. 88-230, S. 1, 12; P.A. 90-98, S. 1, 2; P.A. 93-142, S. 4, 7, 8; P.A. 93-421, S. 19, 22; P.A. 95-220, S. 4–6.)

History: P.A. 93-421 effective July 1, 1993 (Revisor’s note: P.A. 88-230, P.A. 90-98 and P.A. 93-142 authorized substitution of “judicial district of Hartford” for “judicial district of Hartford-New Britain” in public acts of the 1993 session of the general assembly, to take effect September 1, 1996); P.A. 95-220 changed the effective date of P.A. 88-230 from September 1, 1996, to September 1, 1998, effective July 1, 1995.

Sec. 7-578. Municipal comprehensive economic development plan to increase tax base. Within one year of initial participation in tier I or tier II, a participating municipality may develop a comprehensive economic development plan designed to increase the tax base of the municipality to a level that will allow the municipality to provide an adequate level of municipal services. The plan shall be approved by the legislative authority of the municipality. If at any time after the comprehensive economic development plan has been completed and the municipality fails to show substantial progress in meeting the goals of the plan, the state may suspend further assistance to the municipality. The secretary, in consultation with the Commissioner of Economic and Community Development, shall evaluate the comprehensive economic development plan annually. The secretary may provide qualified staff and financial assistance to the qualifying municipality for purposes of developing a comprehensive economic development plan.

(P.A. 93-421, S. 20, 22; P.A. 95-250, S. 1; P.A. 96-211, S. 1, 5, 6.)

History: P.A. 93-421 effective July 1, 1993; P.A. 95-250 and P.A. 96-211 replaced Commissioner and Department of Economic Development with Commissioner and Department of Economic and Community Development.

Sec. 7-579. Definition of deficit obligation re town and city of New Haven. For the purposes of subsection (a) of section 7-394b and sections 7-560 to 7-578, inclusive, deficit obligation, as defined in section 7-560, with respect to the town and city of New Haven shall mean such obligation issued on or after July 1, 1993.

(P.A. 93-421, S. 21, 22.)

History: P.A. 93-421 effective July 1, 1993.

Secs. 7-580 to 7-599. Reserved for future use.