WEST virginia legislature

2020 regular session

Introduced

House Bill 4819

By Delegate Householder

[Introduced February 11, 2020; Referred to the Committee on Political Subdivisions then the Judiciary]

A BILL to amend and reenact §8-35-1 and §8-35-2 of the Code of West Virginia,1931, as amended; and to amend said code by adding thereto four new sections, designated §8-35-3, §8-35-4, §8-35-5 and §8-35-6, all relating to the dissolution of municipalities and to modernizing the process.

Be it enacted by the Legislature of West Virginia:

ARTICLE 35. DISSOLUTION OF MUNICIPALITIES.

§8-35-1. Forfeiture of charter or certificate of incorporation; notice; dissolution of municipality.

(a) Any municipality heretofore incorporated or which shall is hereafter be incorporated and which has no substantial indebtedness, and which shall fail fails for one year to exercise its corporate powers and privileges, or which has not 20 qualified voters, or in which there were not 20 legal votes cast at its last election, or the population of which shall be reduced below 100 persons and so remain for six consecutive months, shall, in either event, have its charter or certificate of incorporation and all rights, powers and privileges so conferred upon such that municipality forfeited and declared dissolved.

(b) The county court commission of the county wherein any such municipality or the major portion of the territory thereof is located shall have has jurisdiction to may hear and determine all matters relating to the forfeiture of such the charter or certificate of incorporation, upon the petition of one or more of its inhabitants qualified voters, or the State Auditor, and to dissolve such the municipal corporation. Ten days’ notice of the filing of such the petition with the clerk of the county court commission of such the county, served upon the mayor and recorder or on the last mayor or recorder thereof, shall be is sufficient notice upon which such the court commission shall so act, and upon the proper proof of the allegations of such the petition, any such charter or certificate of incorporation shall be declared forfeited and the municipal corporation dissolved and all debts of such the municipality shall be ordered paid and the forfeiture and dissolution shall may not become effective until such the debts have been paid or until  the State Auditor has fully exercised the actions authorized by §8-4-1 et seq. of this code. Upon such forfeiture and dissolution all interest of such municipality in corporate funds, if any, in excess of the amounts required to pay corporate debts shall be and the same is hereby transferred to and vested in the State of West Virginia to be controlled by the State Auditor. If the territory so incorporated, or a major part thereof, either in area or in population, shall, however, within one year next after such declaration of forfeiture and dissolution by the county court be reincorporated under this chapter, then the Auditor of the State of West Virginia shall convey unto such new municipality all of the rights of the State of West Virginia in and to the corporate property, moneys, claims, demands and taxes collected or uncollected, of the former municipal corporation so dissolved

(c) A petition for forfeiture shall be filed with the clerk of the county commission. The petition shall be in writing and set forth the reasons for the request to forfeit and dissolve the municipality. The petition for dissolution shall be served upon the mayor and recorder, or on the last mayor or recorder thereof. 

(d) The State Auditor shall promptly conduct an examination under the authority granted under §6-9-1 et seq. of this code, to determine the financial condition of the municipality.

PART II. VOLUNTARY DISSOLUTION OF CLASS III CITY OR

CLASS IV TOWN OR VILLAGE  MUNICIPALITIES.

§8-35-2. Voluntary dissolution of Class III city or Class IV town or village municipal corporation.

(a) A petition for dissolution shall be filed with the governing body of the municipality. The petition shall be in writing, set forth the reasons for the request to dissolve the municipality, and be signed by not less than 25 percent of the legal voters of the municipality as shown by the last preceding general election. The petition for dissolution shall be served upon the mayor and recorder, or on the last mayor or recorder thereof.

(b) Upon the filing of a qualified petition for dissolution of twenty-five or more percent of the legal voters of any Class III city or Class IV town or village municipal corporation, the governing body thereof shall submit to the qualified voters of such the municipal corporation at the next regular municipal election, or at a special municipal election called for that purpose, the question of continuing or dissolving such municipal corporation. It shall be the responsibility of the The governing body to shall verify the total number of eligible petitioners and to determine whether the required percentage of petitioners has been obtained. The governing body shall provide written notice of the election to the State Auditor within five days of determining an election date. The ballots, or ballot labels where voting machines are used, shall have written or printed on them the words:

/ / For Continuance of Municipal Corporation

/ / For Dissolution of Municipal Corporation

Shall the municipality of ______ (name of municipality subject to dissolution) be dissolved?

( ) Yes.

( ) No.

(c) The dissolution election shall be conducted in accordance with applicable election laws.

(d) If a majority of the legal votes cast be for dissolution, then such the municipal corporation shall by operation of law be dissolved upon termination of the term of the governing body then in office: Provided, That all debts or other obligations outstanding against such municipal corporation shall be settled in full at the expiration of six (6) months from the date of the election on the question. The State Auditor shall promptly conduct an examination under the authority granted under §6-9-1 et seq. of this code, to determine the financial condition of the municipality. If a majority of the legal votes cast be for continuance, then such the municipal corporation shall continue in existence unless and until dissolved at some later date under the provisions of §8-35-1 of this code or this section. two. Provided, however, That another election under the provisions of this section two shall not be held within two years of the last such election. Any election under the provisions of this section two shall be held, conducted and superintended and the result thereof ascertained, certified, returned and canvassed in the same manner and by the same persons as an election for municipal officers of such municipal corporation.

PART III. INVOLUNTARY DISSOLUTION OF MUNICIPAL CORPORATION.

§8-35-3. Involuntary dissolution of municipal corporation.

(a) The prosecuting attorney for the county where the municipality or the major portion of the territory thereof is located, or the State Auditor, may petition for involuntary dissolution of a municipality when the government of a municipality ceases to function by reason of the following:

(1)  General municipal elections have not been called in the municipality for two successive general municipal elections;

(2)  A majority of all the members of the governing body fail to qualify for two successive general municipal elections.

(b) The petition requesting involuntary dissolution shall be filed in the circuit court in the county in which the municipality or the major portion of the territory thereof is located.  The petition shall state the facts which justify the request and shall set forth a detailed statement of the assets and liabilities of the municipality insofar as they can be ascertained.

(c) Upon the filing of a petition for the involuntary dissolution of a municipality, the circuit court shall fix a date for a hearing on the request and written notice shall be provided to the State Auditor, and the prosecuting attorney for the county where the municipality or the major portion of the territory thereof is located, within five days.  The date of the hearing shall be not less than 30 days after the date of filing.  The prosecuting attorney for the county in which such municipality or the major portion of the territory thereof is located shall give at least 20 days’ notice of the hearing by publication in a newspaper of general circulation in the municipality, and by posting copies of the notice in a manner consistent with court proceedings.  The notice shall state the purpose of the petition and the date and place of the hearing.

(d) The State Auditor shall promptly conduct an examination under the authority granted under §6-9-1 et seq. of this code, to determine the financial condition of the municipality.

(e) Any person owning property in or registered to vote in the municipality may appear at the hearing and give testimony for or against dissolution of the municipality.  If the court finds that the government of the municipality has ceased to function because of the reasons listed in subsection (a) of this section, it shall enter an order for dissolution of the municipality.  The order of the circuit court shall state when the dissolution shall take effect and appoint the State Auditor to act as special receiver to wind up the affairs of the municipality and dispose of its property. 

(f) The order of dissolution shall be filed with the clerk of the county commission and the Office of the Secretary of State.

PART IV. DISPOSITION OF PROPERTY, DEBTS AND LIABILITIES.

§8-35-4. State Auditor as special receiver.

(a)  Upon declaration of the forfeiture of the charter or certificate of incorporation by the county commission, or the certification of the election for voluntary dissolution, or upon an order by the circuit court for involuntary dissolution, as set forth in this article, the State Auditor shall by operation of law, act as special receiver for the dissolved municipality.

(b)  The State Auditor, acting as special receiver of the dissolved municipality may:

(1) Take legal control of assets, including municipal corporate property, moneys, claims, demands and taxes collected or uncollected;

(2) Protect assets;

(3) File claims on behalf of the dissolved municipality in receivership;

(4) Initiate necessary and proper bankruptcy proceedings, including, but not limited to, filing a petition in the name of the municipal corporation under Chapter 9 of Title 11 of the United States Code, and to act on the municipality’s behalf in such proceeding, to distribute assets to claimants or creditors, and;

(5) Take any such actions as the State Auditor may determine necessary and appropriate to wind up the affairs of the municipality.

(c) Any excess of amounts required to pay corporate debts shall be maintained in a special fund titled “municipal dissolution account” to be controlled by the State Auditor to offset the costs associated with conducting examinations and legal expenses pursuant to the provisions of this article.

§8-35-5. Disposition of property belonging to dissolved municipal corporation.

(a)  No dissolution of an incorporated municipality may impair the rights of any person in any contract or agreement to which the municipality is a party.

(b) The deposits and investments belonging to the dissolved municipality shall be used first to pay the municipality’s debts and liabilities.

(c) If the deposits and investments belonging to the municipality are not sufficient to satisfy its debts and liabilities, then the State Auditor may initiate the liquidation of the dissolved municipality’s property pursuant to §8-35-8 of this code.

§8-35-6. Sale and liquidation of dissolved municipal assets.

(a)  If the State Auditor, as special receiver, makes a determination that a dissolved municipality’s real and/or personal property shall be liquidated to satisfy its debts and liabilities then a public auction may be conducted. The property shall be sold either at an on-site public auction or by utilizing an Internet-based public auction service, or at a suitable location within the county wherein the dissolved municipality was principally located and shall be conducted by the State Auditor. Before making a sale, notice of the time, terms, manner and either the location of the sale or the Internet-based public auction service to be utilized, together with a brief description of the property to be sold, shall be published as a Class II legal advertisement in compliance with §6-9-1 et seq. of this code, and the publication area for the publication shall be within the county.

(b) The provisions of subsection (a) of this section concerning sale as public auction are not applicable to the State Auditor selling or disposing of the property for public use to:

(1) The United States of America its instrumentalities, agencies or political subdivisions;

(2) The State of West Virginia, or its political subdivisions, including county boards of education, volunteer fire departments, and volunteer ambulance services; or

(3) Any authority, commission, instrumentality, or agency established by act of the State of West Virginia.

(c) The State Auditor is not required to exclusively consider the present commercial or market value of the property for all sales made pursuant to this section,

(d) No officer or employee of the State Auditor or the prosecuting attorney for the county where the municipality or the major portion of the territory thereof is located, or his or her immediate family, may purchase or acquire any property municipal assets disposed of pursuant to this section.

NOTE: The purpose of this bill is to modernize the process for dissolution of municipal corporations in this state.

Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.