School Law Primer Michigan School Business Officials. Caution

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School Law Primer

Michigan School Business Officials

September 22, 2015

Michael D. Gresens Christopher J. Iamarino

This document provides information of a general nature regarding judicial, legislative, or other developments. None of this information is intended as legal advice or opinion relative to specific facts, matters, situations, or issues. Additional facts or future legal developments may affect the subjects addressed. This document may not be reproduced or redistributed, in whole or in part, without the express written permission of Thrun Law Firm, P.C.

Caution

• These slides contain edited excerpts and interpretations of general legal standards

• Without the related presentation, these materials could be misconstrued

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Topics

• Legal framework for schools • School elections • Borrowing • Construction 3 4

Supplemental Documents

• Revised School Code • State School Aid Act

• Laws Relating to Education • Rules Relating to Education • School Law Notes

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Sources of Law

• Constitution • Statutes • Regulations • Ordinances

• Case law (court decisions) • Administrative agency • Local policies and bylaws

Decision-Making Resources

• Federal and Michigan Law • Case law/court decisions • Statutes

• Regulations

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• School District Documents • Board policies, bylaws &

regulations

• Collective bargaining agreements • Employee/student handbooks

Decision-Making Resources (con't)

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Local Documents

• Board policies & bylaws • Administrative regulations

• Collective bargaining agreements • Individual contracts

• Employee handbooks • Student handbooks

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Michigan Law

• Revised School Code • State School Aid Act

• Laws Relating to Education • Rules Relating to Education

Revised School Code

• Effective July 1, 1996

• MCL 380.1 et seq. or MSA 15.41 et seq. • Predecessors

• School Code of 1976 • School Code of 1955 • School Code of 1927

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“Except as otherwise provided in this act, a .... Person who neglects or refuses to do or perform an act requested by this act, or who violates or knowingly permits or consents to a violation of this act, is guilty of a

misdemeanor punishable by a fine not more than $500.00, or imprisonment for not more than 3 months, or both.”

MCL 380.1804

Revised School Code § 1804

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State School Aid Act

• MCL 388.1601 et seq.

• Appropriations

• Conditions

• Penalties

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SSA § 1761

“A school official or member of a board or other person who neglects or refuses to do or perform an act required by this act or who violates or knowingly permits or

consents to the violation of this act is guilty of a misdemeanor, punishable by

imprisonment for not more than 90 days, or a fine of not more than $1,500.00, or both.”

MCL 388.1761

Operations

• Incompatible Public Offices - 15.181 • Freedom of Information Act - 15.231 • Open Meetings Act - 15.261

• Intergovernmental Contracts - 124.1 • Urban Cooperation Act - 124.501

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Operations (con't)

• Governmental Liability Act - 691.1401 • Persons with Disabilities Act - 37.1101 • Elliott-Larsen Civil Rights Act - 37.2101

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Employment

• Public Servant Contracts - 15.321

• Whistleblowers’ Protection Act - 15.361 • Political Activities of Public EEs - 15401 • Temporary Assignment of EEs - 15.501 • Bullard-Plawecki - 423.501

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Employment (con't)

• Teachers’ Tenure Act - 38.71

• Public School EEs Retirement - 38.1301 • Oath of Teachers - 388.401

• Re-employ Teachers (Military) - 388.421 • Public Emp. Relations Act - 423.201

Children

• Youth Employment Act - 409.101 • Community Child Watch - 722.11 • Child Care Organization - 722.111 • Child Protection Law - 722.621 • Child Identification Act - 722.771

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Educational

• Critical Health Problems Ed Act - 388.381 • Parent Cooperative Preschools - 388.1021 • Assessment of Remedial Assistance

-388.1081

• Compact for Education - 388.1301 • Libraries - 397.131

• Correspondence School Contracts - 566.551

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Transportation

• Michigan Vehicle Code - 257.57

• Vehicles on School Property - 257.961 • Public Transportation Act - 257.1801

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Facilities

• Fire Prevention Code - 29.19 • Building Authorities - 123.952a • Barrier Free Design - 125.1351 • Condemnation Procedures - 213.51 • Athletic Services Provider - 333.26301 • Construction of School Buildings - 388.851

• Depositories for Public Dollars - 129.11 • Investment of Surplus Funds - 129.91 • Budget Hearings - 141.411

• Uniform Budget/Accounting - 141.421 • Shared Credit Rating - 141.1051

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• Fiscal Responsibility - 141.1201 • Sales Tax Act - 205.54a

• Property Tax Act - 211.7m

Finance (con't)

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RULES RELATING TO EDUCATION

(State Agency Rules

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Elections, Borrowing and

Construction

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School Elections

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School Election Coordinator

• District territory within single city or

township

• City or township clerk

• District territory in more than 1 city or

township

• County clerk with largest number of registered district electors

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Responsibilities

• Conducts regular/special election for ballot question/board vacancy

• Receives

• Board requests for special election

• Filing fees, nominating petitions, affidavits of identity for board candidates

• Referendum petitions for special election • Issues absent voter ballots

• Forwards ballot language to county clerk

Regular Election

“An election held on a regular

election date to elect an individual

to, or nominate an individual for,

elective office in the regular

course of the terms of that elective

office”

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Special Election

“An election to elect an individual

to, or nominate an individual for, a

partial term in office or to submit a

ballot question to the electors”

MCL 168.4(g)

Election Dates

• Regular election dates are:

• 2nd Tuesday in March of presidential primary years

• 1st Tuesday after 1st Monday in May • 1st Tuesday after 1st Monday in August • 1st Tuesday after 1st Monday in

November

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Election Costs

• Joint school and county/city/township election

• District pays 100% of actual

additional costs attributable to its election

• School election only

• District pays county/city/township 100% of actual costs

Recent Election Changes

• All board member elections held in November even years

• Beginning January 1, 2013, school district election coordinator meetings changed from every 2 years to every 4 years

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Campaign Finance Act

• 1976 PA 388 (eff. 12/30/76)

• Huron Valley Schs v Secretary of State, 266 Mich App 638 (2005)

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General Property Tax Act

• 1999 PA 248 (eff. 3/10/00)

• Requires specific ballot information for: • Millage proposal

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• Bank Loans

• Promissory Notes

• Mortgages

Lending Prohibitions

Watch Out!

• Michigan Department of Treasury • IRS

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Revised Municipal Finance Act

• 2001 PA 34 (eff. 3/1/02)

• Notice of Limited Tax Pledge • Qualified status?

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Current Application Process

• Qualifying statement form

• File “on line” each year (by Dec. 31) • Qualified status posted online

• Denied qualified status?

• Application for each issue if not “qualified”

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Audit Issues

• Timely filing (December 31)

• References to “notes” and “loans”

• Is your budget updated?

Debt Retirement Fund Balance

• Monitor closely, Treasury is watching! • No funds for operating purposes

• Tailor debt levy to debt payment needs • Penalties

• Denial of “qualified” status • Taxpayer refund

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Capital Projects

• Voted bonds • Non-voted bonds • Sinking funds

• Capital improvement tax notes • IPAs/lease purchase agreements

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To Qualify or Not to Qualify

What is School Loan Revolving Fund

(“SLRF”)?

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SLRF Program (2005 PA 92)

• School Loan Revolving Fund • Amended by 2012 PA 437

• Requires annual debt millage recalculation

• Requires additional ballot language • Caps future loans until 2016

• Watch November 2015!

SLRF Program (2005 PA 92)

(con't)

• 2015 PA 96 and 97

• Refunding bonds no longer set debt millage levy minimum

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Advantages

• State of Michigan’s credit rating? • Borrow from State for debt service • Project scope reviewed

• Reasonably modest maximum millage rate for all districts, despite property valuation

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Disadvantages

• Prevailing wage

• Lengthy approval process and standards • Technology/equipment amortization

standards

• Less flexibility if projects must be altered

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Considerations

• District’s credit rating • Future borrowing needs

• Tax impact if not borrowing from SLRF

Current Michigan Ratings

• Moody’s: Aa1 • S&P:

AA-• Improving economy; improved budget • “AAA” rated until November 2003

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Qualified Voted Bonds

• At least 150 days before election • Finalize project scope

• Notify Treasury

• 120-150 days before election • Meet with Treasury

• At least 84 days before election

• Certify ballot to election coordinator • Call election

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Non-Qualified Voted Bonds

• At least 90 days before election • Finalize project scope

• Not less than 84 days before election • Certify ballot proposition(s) to

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Sinking Fund Millage

• School Code § 1212 • Purpose

• Treasury guidelines issued June 28, 1995 (rescinded)

• Various proposed bills currently in Legislature to expand for school security, buses, and technology

Installment Purchase Agreements

• District may purchase real or personal property for public purpose

• Can be used for land, equipment, buses, copiers, technology

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Act 99 Limitations

• PA 99 of 1933

• IPA payback period cannot exceed useful life of purchased item

• 15-year maximum duration

• Total outstanding balance not to exceed 1.25% of district’s taxable value of real and personal property

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The “Life” of a Local IPA

• Contact legal counsel

• Adopt authorizing resolution • Distribute solicitation for bids • Take and award bid

• IPA and closing documents

• Closing (usually about 2 weeks after sale, depending on vendor)

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Lease Purchase Agreements

• Usually vendor-proposed

• Rarely comply with Michigan law • Common defects

Operating Cash Flow

• State Aid Notes

• MFA (formerly MMBA) • “Public”

• Tax Notes • Line of Credit

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State Aid Notes (SANs)

• Cash flow borrowing • School Code § 1225 • Short-term borrowing

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SAN Requirements

• Federal

• Small or Large Issuer • Bank qualified

• State

• Within fiscal year, borrowing cannot exceed 70% of state aid

• Last 4 months of fiscal year only, up to 50% of next year’s apportioned state aid • Prior approval needed if not qualified

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Borrowing Options

• Michigan Finance Authority (formerly “Michigan Municipal Bond Authority”)

• “MFA”

• Pool Programs

• Solicit bids from local/national banks • Competitive sale

MFA SANs

• MFA Pool Structure • August pool

• Sometimes a spring “bridge loan” pool • Winter pools if “critical mass” exists

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MFA SANs

• Prepare cash flows

• File application with MFA

• Prior approval if no “qualified status” • MFA forwards purchase contract for

District to accept rate

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Timing

• Review cash flow

• Adopt authorizing resolution before MFA application deadline (usually by end of June)

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Cash Flow

• For “sizing” • Federal tax law • MCL 380.1225

• Operating cash flow deficit required for State Aid Note

Set-Asides

• Why use?

• When are they inappropriate? • Lump sum payment

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Weekly Cash Flow

• Beginning/ending balances should • Not include Note proceeds

• Correspond to monthly cash flow balances

• Timing of greatest deficit and receipt of State Aid payment

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Public SAN Procedures

• Notice of Board meeting for limited tax full faith and credit pledge

• Adopt authorizing resolution • Conduct sale

• Closing documents • Receipt of funds • Post-issuance filing • Fees

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Tax Anticipation Notes (TANs)

• Similar to state aid notes

• Pledge tax revenues instead of state aid

• Not as common for local districts as state aid notes

Line of Credit

• Revised School Code § 1225

• Less appealing than State Aid Notes

• Treasury approval (even if “qualified”) • Costs

• Treasury filings • Sizing restrictions

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School Construction Projects

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Architect/Engineer

• Prepares plans/specifications for • School building/addition

• Total construction cost $15,000 or more

• May supervise construction and verify that it is constructed in workman-like manner consistent with

plans/specifications

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School Construction Act

• Addition: Space adding cubic contents to existing building

• Remodeling: Alteration, construction, or remodeling of partitions, hallways, stairways, and means of egress,

replacement, relocation or

reconstruction of heating, ventilating, and sanitary equipment

School Construction Act

• School Building: All buildings used for school purposes

• All plans subject to State Construction Code and inspection

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Recent Developments

• Plaintiffs with claims for injury from defective school buildings must give notice per

Government Tort Liability Act. Stephens v

Ruben Daniels M/S (2013)

• LARA (formerly DELEG) Public School Site Plan Review Reference Guide (rev'd 7/13/11) • Lack of signed contract does not bar contract

enforcement. Garrison v Bishop Airport (2010)

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Contractor Bond

• Required for any contract over $50,000 for • Payment (labor and materials)

• Performance

• Furnished at contractor’s expense • Not less than 25% of contract amount • District must verify bond validity

• Kammer Asphalt v East China Twp Schs, 433 Mich 176 (1993)

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