2014 -- S 2778

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LC005105

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO TOWNS AND CITIES - BUDGET COMMISSIONS

     Introduced By: Senators Ruggerio, Goodwin, Pearson, Lombardi, and Gallo

     Date Introduced: March 19, 2014

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 45-9-1, 45-9-2, 45-9-3, 45-9-5, 45-9-6 and 45-9-7 of the General

Laws in Chapter 45-9 entitled "Budget Commissions" are hereby amended to read as follows:

     45-9-1. Declaration of policy and legal standard. -- It shall be the policy of the state to

provide a mechanism for the state to work with cities, and towns and fire districts undergoing

financial distress that threatens the fiscal well-being, public safety and welfare of such cities, and

towns and fire districts, or other cities and towns or the state, with the state providing varying

levels of support and control depending on the circumstances. The powers delegated by the

General Assembly in this chapter shall be carried out having due regard for the needs of the

citizens of the state and of the city, or town, or fire district, and in such a manner as will best

preserve the safety and welfare of citizens of the state and their property, and the access of the

state and its municipalities to capital markets, all to the public benefit and good.

     45-9-2. Definitions. -- As used in this chapter the following words shall, unless the

context clearly requires otherwise, have the following meanings:

      (1) "Budget commission", means the budget and review commission established under

sections 45-9-5 and 45-9-6.

      (2) "Charter", means the home rule charter or the legislative charter of any city or town.

      (3) "Division of municipal finance", means the division of municipal finance in the

department of revenue or any successor department or agency.

      (4) "Director of revenue", means the director of the department of revenue.

      (5) "Elected chief executive officer", means in cities and towns having a popularly

elected chief executive officer, the popularly elected chief executive officer, and in cities and

towns where there is no popularly elected chief executive officer, the president of the city or town

council.

      (6) "Fiscal overseer", means the financial overseer appointed under section 45-9-3.

      (7) "General Treasurer", means the general treasurer of the state.

      (8) "Municipal budget", means the fiscal year operating budget of the city, or town, or

fire district, inclusive of the school department budget and all other departments.

      (9) "Officer", means the chief administrative and financial officer appointed under

section 45-9-10 after abolition of a fiscal overseer or a budget commission or a receiver in a city

or town.

      (10) "Receiver", means the receiver appointed pursuant to sections 45-9-7 or 45-9-8.

      (11) "School committee", means the school committee of the city or town, but shall not

mean or include a regional school district committee.

      (12) "State Aid", means the funds made available to cities and towns:

      (i) As state aid pursuant to chapter 45-13 of the general laws, but specifically excluding

reimbursements to cities and towns for the cost of state mandates pursuant to section 45-13-9;

      (ii) As school operations aid provided for in sections 16-7-5 -- 16-7-34.3 of the general

laws and as school housing aid pursuant to sections 16-7-35 -- 16-7-47 of the general laws, but

subject to any pledge to bonds issued to finance school projects by the Rhode Island health and

educational building corporation;

      (iii) In replacement of motor vehicle and trailer excise taxes pursuant to chapter 44-34.1

of the general laws;

      (iv) From the public service corporation tax pursuant to chapter 44-13 of the general

laws;

      (v) From the local meal and beverage tax pursuant to section 44-18-18.1 of the general

laws and the hotel tax pursuant to section 44-18-36.1 of the general laws; and

      (vi) Pursuant to all acts supplementing such chapters listed in subdivisions (i) through (v)

above or pursuant to any other law hereafter enacted providing for funds to municipalities in lieu

of, or in substitution for, or in addition to the funds provided pursuant to acts supplementing such

chapters listed in subdivisions (i) through (v);

     (13) "City or town" includes fire districts.

     45-9-3. Appointment and duties of fiscal overseer. -- (a) Upon joint request by a city's

or town's elected chief executive officer and city or town council, or for a fire district, the

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governing body as established by charter, which request is approved by the division of municipal

finance and the auditor general, or in absence of such a request, in the event that the director of

revenue, in consultation with the auditor general, makes any two (2) or more of the findings set

forth in subsection (b), the director of revenue may appoint a fiscal overseer for the city or town

to assess the ability of the city or town government to manage the city's or town's fiscal

challenges.

      (b) The director of revenue may appoint a fiscal overseer if the director finds in his or

her sole discretion that any two (2) of the following events have occurred which are of such a

magnitude that they threaten the fiscal well-being of the city or town, diminishing the city or

town's ability to provide for the public safety or welfare of the citizens of the city or town:

      (1) The city or town projects a deficit in the municipal budget in the current fiscal year

and again in the upcoming fiscal year;

      (2) The city or town has not filed its audits with the auditor general by the deadlines

required by law for two (2) successive fiscal years (not including extensions authorized by the

auditor general);

      (3) The city or town has been downgraded by one of the nationally recognized statistical

rating organizations;

      (4) The city or town is otherwise unable to obtain access to credit markets on reasonable

terms in the sole judgment of the director of revenue.

      (5) The city or town does not promptly respond to requests made by the director of

revenue, or the auditor general, or the chairpersons of the house and/or senate finance committees

for financial information and operating data necessary to assess the fiscal condition of the city or

town in the sole judgment of the director of revenue.

      (c) The director of revenue may also appoint a fiscal overseer if a city or town fails to

comply with the requirements of sections 45-12-22.1 -- 45-12-22.5 of the general laws.

      (d) The fiscal overseer shall without limitation:

      (1) Recommend to the elected chief executive officer, fire district board of directors, city

or town council and school committee sound fiscal policies for implementation;

      (2) Supervise all financial services and activities;

      (3) Advise the assessors, director of finance, city or town treasurer, purchasing agent and

employees performing similar duties but with different titles;

      (4) Provide assistance in all matters related to municipal or fire district financial affairs;

      (5) Assist in development and preparation of the municipal budget, all department

budgets and spending plans;

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      (6) Review all proposed contracts and obligations;

      (7) Monitor the expenditures of all funds;

      (8) Approve the annual or supplemental municipal budgets of the city or town and all of

its departments; and

      (9) Report monthly to the director of revenue, the auditor general, the governor and the

chairpersons of the house finance and senate finance committees on the progress made towards

reducing the municipality's or fire district's deficit and otherwise attaining fiscal stability.

      (e) All department budgets and requests for municipal budget transfers shall be

submitted to the fiscal overseer for review and approval.

      (f) The city or town shall annually appropriate amounts sufficient for the proper

administration of the fiscal overseer and staff, as determined in writing by the division of

municipal finance. If the city or town fails to appropriate such amounts, the division of municipal

finance shall direct the general treasurer to deduct the necessary funds from the city's or town's

distribution of state aid and shall expend those funds directly for the benefit of the fiscal overseer

and staff.

      (g) Within one hundred twenty (120) days of being appointed by the director of revenue,

the fiscal overseer shall develop a three (3)-year operating and capital financial plan to achieve

fiscal stability in the city or town. The plan shall include a preliminary analysis of the city's or

town's financial situation and the fiscal overseer's initial recommendations to immediately begin

to address the city's or town's operating and structural deficits. The fiscal overseer shall have the

power to compel operational, performance or forensic audits, or any other similar assessments.

The fiscal overseer shall have the power, at the expense of the city or town, to employ, retain,

supervise such managerial, professional and clerical staff as are necessary to carry out the

responsibility of fiscal overseer, subject to the approval of the division of municipal finance;

provided, however, that the fiscal overseer shall not be subject to chapter 37-2 or chapter 45-55 of

the general laws in employing such staff.

     45-9-5. Reports of fiscal overseer and appointment of budget and review

commission. -- (a) The fiscal overseer shall report in writing to the division of municipal finance

if the fiscal overseer concludes that the city or town: (1) Is unable to present a balanced municipal

budget; (2) Faces a fiscal crisis that poses an imminent danger to the safety of the citizens of the

city or town or their property; (3) Will not achieve fiscal stability without the assistance of a

budget commission; or (4) That the tax levy of the fiscal year should not be approved.

      (b) If the fiscal overseer believes, at any time, that a budget commission should be

appointed, the fiscal overseer may report that belief to the division of municipal finance.

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      (c) If the fiscal overseer reports to the division of municipal finance under subsections

(a) or (b), the director of revenue may immediately abolish the fiscal overseer and appoint a

budget commission.

      (d) A budget commission shall have all of the powers and duties set forth in sections 45-

9-3 and 45-9-6.

      (e) If a budget commission has not been appointed and if the division of municipal

finance determines that the city or town has taken steps necessary to achieve long-term fiscal

sustainability and no longer requires active state oversight, the director of revenue may abolish

the fiscal overseer.

      (f) If the division of municipal finance notifies the director of revenue in writing that the

city or town is unable to achieve a balanced municipal budget, then the director of revenue shall

establish a budget commission.

      (g) Upon joint request by a city's or town's elected chief executive officer and city or

town council, or, for a fire district, the governing body as established by charter, which request is

approved by the division of municipal finance, the director of revenue, in consultation with the

auditor general, may establish a budget commission for such city or town.

     45-9-6. Composition of budget commission. -- (a) If a budget commission is established

under section 45-9-5 or section 45-12-22.7, it shall consist of five (5) members: three (3) of

whom shall be designees of the director of revenue, one of whom shall be the elected chief

executive officer of the city and one of whom shall be the president of the city or town council. In

cities or towns in which the elected chief executive officer for purposes of this chapter is the

president of the city or town council, one member shall be the appointed city or town manager or

town administrator (or, if none, the city or town chief financial officer) as the fifth (5th) member.

For a fire district, it shall consist of five (5) members: Three (3) of the members of the budget

commission shall be designees of the director of revenue; One shall be the chairperson of the

district's governing body; and one shall be the fire chief of the district. The budget commission

shall act by a majority vote of all its members. The budget commission shall initiate and assure

the implementation of appropriate measures to secure the financial stability of the city or town.

The budget commission shall continue in existence until the director of revenue abolishes it.

      The budget commission shall be subject to chapter 36-2 of the general laws, "Access to

Public Records," and chapter 36-14 of the general laws, "Code of Ethics". The budget

commission shall be subject to chapter 42-46 of the general laws "Open Meetings" when meeting

to take action on the following matters:

      (1) Levy and assessment of taxes;

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      (2) Rulemaking or suspension of rules;

      (3) Adoption of a municipal budget;

      (4) Approval of collective bargaining agreements and amendments to collective

bargaining agreements; and

      (5) Making a determination under section 45-9-7 that the powers of the budget

commission are insufficient to restore fiscal stability to the city or town.

      (b) Action by the budget commission under this chapter shall constitute action by the

city or town for all purposes under the general laws, under any special law and under the city or

town charter.

      (c) Until the budget commission ceases to exist, no appropriation, borrowing

authorization, transfer, or other municipal spending authority shall take effect until approved by

the budget commission. The budget commission shall approve all appropriations, borrowing

authorizations, transfers and other municipal spending authorizations, in whole or part.

      (d) In addition to the authority and powers conferred elsewhere in this chapter, and

notwithstanding any city or town charter provision or local ordinance to the contrary, the budget

commission shall have the power to:

      (1) Amend, formulate and execute the annual municipal budget and supplemental

municipal budgets of the city or town, including the establishment, increase or decrease of any

appropriations and spending authority for all departments, budget commissions, committees,

agencies or other units of the city or town; provided, however, that notwithstanding sections 16-2-

9 and 16-2-18 of the general laws, this clause shall fully apply to the school department and all

school spending purposes;

      (2) Implement and maintain uniform budget guidelines and procedures for all

departments;

      (3) Amend, formulate and execute capital budgets, including to amend any borrowing

authorization, or finance or refinance any debt in accordance with the law;

      (4) Amortize operational deficits in an amount as the director of revenue approves and

for a term not longer than five (5) years;

      (5) Develop and maintain a uniform system for all financial planning and operations in

all departments, offices, boards, commissions, committees, agencies or other units of the city's or

town's government;

      (6) Review and approve or disapprove all proposed contracts for goods or services;

      (7) Notwithstanding any general or special law to the contrary, establish, increase or

decrease any fee, rate or charge, for any service, license, permit or other municipal activity,

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otherwise within the authority of the city or town;

      (8) Appoint, remove, supervise and control all city and town employees and have control

over all personnel matters other than disciplinary matters; provided, that the budget commission

shall hold all existing powers to hire and fire and set the terms and conditions of employment

held by other employees or officers of the city or town; provided, further, that the budget

commission shall have the authority to exercise all powers otherwise available to a municipality

or fire district regarding contractual obligations during a fiscal emergency; provided, further, that

no city or town employee or officer shall hire, fire, transfer or alter the compensation or benefits

of a city or town employee except with the written approval of the budget commission; and

provided, further, that the budget commission may delegate or otherwise assign these powers

with the approval of the director of revenue;

      (9) Alter or eliminate the compensation and/or benefits of elected officials of the city or

town to reflect the fiscal emergency and changes in the responsibilities of the officials as

provided by this chapter;

      (10) Employ, retain and supervise such managerial, professional and clerical staff as are

necessary to carry out its responsibilities; provided, however, that such employment, retention

and supervisory decisions are subject to the approval of the director of revenue; provided, further,

that the budget commission shall not be subject to chapter 37-2 or chapter 45-55 of the general

laws in employing such staff; provided, further, that the budget commission, with the approval of

the director of revenue, shall have authority to set the compensation, terms and conditions of

employment of its own staff; provided, further, that the city or town shall annually appropriate

amounts sufficient for the compensation of personnel hired under this clause as determined and

fixed by the budget commission; provided, further, that if the city or town fails to appropriate

such amounts, the director of revenue shall direct the general treasurer to deduct the necessary

funds from the city's or town's distribution of state aid and shall expend those funds directly for

the benefit of the budget commission;

      (11) Reorganize, consolidate or abolish departments, commissions, authorities, boards,

offices or functions of the city or town, in whole or in part, and to establish such new

departments, commissions, authorities, boards, offices or functions as it deems necessary, and to

transfer the duties, powers, functions and appropriations of one department, commission, board,

office or other unit to another department, commission, authority, board or office and in

connection therewith remove and appoint new members for any such commission, authority,

board or department which appointees shall serve the remainder of any unexpired term of their

predecessor;

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      (12) Appoint, in consultation with the director of revenue, persons to fill vacancies on

any authority, board, committee, department or office;

      (13) Sell, lease or otherwise transfer real property and other assets of the city or town

with the approval of the director of revenue;

      (14) Purchase, lease or otherwise acquire property or other assets on behalf of the city or

town with the approval of the director of revenue;

      (15) Enter into contracts, including, but not limited to, contracts with other governmental

entities, and such other governmental entities are hereby authorized to enter into such contracts;

      (16) Adopt rules and regulations governing the operation and administration of the city

or town which permit the budget commission to effectively carry out this chapter under

subsection 42-35-3(b) of the general laws;

      (17) Alter or rescind any action or decision of any municipal officer, employee, board,

authority or commission within fourteen (14) days after receipt of notice of such action or

decision;

      (18) Suspend, in consultation with the director of revenue any rules and regulations of

the city or town;

      (19) Notwithstanding any other general law, special act, charter provision or ordinance,

and in conformity with the reserved powers of the general assembly pursuant to Article XIII,

section 5 of the Constitution of the state, a budget commission is authorized to issue bonds, notes

or certificates of indebtedness to fund the deficit of a city or town without regard to section 45-

12-22.4 of the general laws, to fund cash flow and to finance capital projects. Bonds, notes or

certificates of indebtedness issued under authority of this chapter shall be general obligation

bonds backed by the full faith and credit and taxing power of the city or town; provided, however,

that the budget commission may pledge future distributions of state aid for the purpose of retiring

such bonds, notes or certificates of indebtedness. If any state aid is so pledged, the budget

commission shall execute on behalf of the city or town a trust agreement with a corporate trustee,

which may be any bank or trust company having the powers of a trust company within the state,

and any state aid so pledged shall be paid by the general treasurer directly to the trustee to be held

in trust and applied to the payment of principal and interest on such bonds, notes or certificates of

indebtedness; any earnings derived from the investment of such pledged aid shall be applied as

needed to the payment of that principal and interest and for trustee's fees and related expenses,

with any excess to be paid to the city or town. Bonds, notes or certificates of indebtedness

authorized under authority of this chapter shall be executed on behalf of the city or town by a

member of the commission and, except as provided for in this chapter, may be subject to the

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provisions of chapter 45-12 of the general laws so far as apt, or may be subject to the provisions

of any special bond act enacted authorizing the issuance of bonds of a city or town so far as apt,

provided, however that any bonds or notes issued for school purposes must be approved by the

general assembly in order to qualify for school housing aid as set forth in chapter 16-7 of the

general laws; and

      (20) Exercise all powers under the general laws and this chapter or any special act, any

charter provision or ordinance that any elected official of the city or town may exercise, acting

separately or jointly; provided, however, that with respect to any such exercise of powers by the

budget commission, the elected officials shall not rescind or take any action contrary to such

action by the budget commission so long as the budget commission continues to exist.

      (21) Certify to the Rhode Island department of revenue the need to advance payments of

the state's basic education program under chapter 7 of title 16 of the Rhode Island general laws in

the amount determined by the budget commission. Said amount shall be advanced, subject to

approval of the director of the department of revenue, notwithstanding any general or public law

to the contrary. The director of the department of revenue shall provide notice of any advance

payments to the fiscal advisors of the house and senate finance committees. The state general

treasurer shall deduct the estimated cost to the state's general fund resulting from any advance

payments.

     45-9-7. Appointment of receiver. -- If the budget commission established by section 45-

9-5 concludes that its powers are insufficient to restore fiscal stability to the city or town, it shall

so notify the director of revenue, and shall forward to the director of revenue a statement of the

reasons why it has been unable to restore fiscal stability to the city or town. Upon receipt of such

statement, the director of revenue shall terminate the existence of the budget commission,

notwithstanding section 45-9-5, and the director of revenue shall appoint a receiver for the city or

town for a period as the director of revenue may determine. The director of revenue may, at any

time, and without cause, remove the receiver and appoint a successor, or terminate the

receivership.

      (b) The receiver shall have the following powers:

      (1) All powers of the fiscal overseer and budget commission under sections 45-9-2 and

45-9-6. Such powers shall remain through the period of any receivership;

      (2) The power to exercise any function or power of any municipal or fire district officer

or employee, board, authority or commission, whether elected or otherwise relating to or

impacting the fiscal stability of the city or town including, without limitation, school and zoning

matters; and

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      (3) The power to file a petition in the name of the city or town under Chapter 9 of Title

11 of the United States Code, and to act on the city's or town's behalf in any such proceeding.

      (c) Upon the appointment of a receiver, the receiver shall have the right to exercise the

powers of the elected officials under the general laws, special laws and the city or town charter

and ordinances relating to or impacting the fiscal stability of the city or town including, without

limitation, school and zoning matters; provided, further, that the powers of the receiver shall be

superior to and supersede the powers of the elected officials of the city or town shall continue to

be elected in accordance with the city or town charter, and shall serve in an advisory capacity to

the receiver. The receiver shall allow the city's or town's elected officials to serve their

constituents by providing advice to the receiver on the matters relating to the operation of the city

or town. In the event a conflict arises between the chief elected official or city or town council

and the receiver, the receiver's decision shall prevail. The director of revenue shall determine the

salary of the receiver, which salary shall be payable by the city or town.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TOWNS AND CITIES - BUDGET COMMISSIONS

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     This act would provide distressed fire districts with financial assistance through the

appointment of a fiscal overseer, budget commission, or receiver.

     This act would take effect upon passage.

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