H. B. 4256
(By Delegates Warner and Ennis)
[Introduced February 2, 2004; referred to the
Committee on Pensions and Retirement then Finance.]
A BILL to amend the code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §8-22A-1, §8-22A-2,
§8-22A-3, §8-22A-4, §8-22A-5, §8-22A-6, §8-22A-7, §8-22A-8,
§8-22A-9, §8-22A-10, §8-22A-11, §8-22A-12, §8-22A-13 and §8-
22A-14, relating to the West Virginia municipal pension plan
funding standard and recovery act; providing for declaration
of policy, legislative findings and legislative intent;
providing for definitions; providing for the issuance of bonds
to fund the payment of annual benefits of certain policemen's
pension and relief funds and certain firemen's pension and
relief funds; providing for the issuance of bonds to amortize
the unfunded actuarial accrued liability of certain
policemen's pension and relief funds and certain firemen's
pension and relief funds; providing for the method of bond
issuance and the manner of sale of bonds; providing authority to enter into contracts with bondholders; providing for the
terms and provisions of bonds, trust indentures and other
agreements; providing for refunding bonds; providing for
pledges and covenants relating to bonds; providing for legal
remedies of bondholders; providing that bonds are negotiable
instruments; providing that bonds are legal investments in the
state; providing that bonds and the income therefrom are
exempt from taxation in the state; providing that prior to the
issuance of the first series of bonds by any municipality,
such municipality shall request a resolution of the
Legislature affirming the ability of the municipality to issue
the proposed bonds; and providing for severability of
provisions of this article.
Be it enacted by the Legislature of West Virginia:
That the code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §8-22A-1, §8-22A-2, §8-
22A-3, §8-22A-4, §8-22A-5, §8-22A-6, §8-22A-7, §8-22A-8, §8-22A-9,
§8-22A-10, §8-22A-11, §8-22A-12, §8-22A-13 and §8-22A-14, all to
read as follows:
ARTICLE 22A. MUNICIPAL PENSION PLAN FUNDING STANDARD AND RECOVERY
This article shall be known and may be cited as the "Municipal
Pension Plan Funding Standard and Recovery Act".
§8-22A-2.Declaration of policy; legislative findings; legislative
The Legislature finds and declares that:
(a) Certain municipalities have established policemen's pension
and relief funds and firemen's pension and relief funds pursuant to
article twenty-two, chapter eight of this code for the respective
benefit of the participating police officers and firefighters.
(b) The municipalities are obligated to fund these pension funds
on an actuarially sound basis, and that the obligation of the
pension funds to pay current benefits is a general obligation of
(c) Certain pension funds have significant unfunded actuarial
accrued liabilities that are determined to be onerous to those
municipalities and a threat to the welfare and safety of the
participating public employees as well as to the general citizenry
of the municipalities.
(d) This article provides for the determination and funding of
the unfunded actuarial accrued liability of the pension funds
through the issuance of bonds for the purpose of providing for the
safety and soundness of the pension funds; for changes in the
boards of trustees responsible for the administration of the funds
for achieving improved management of the assets of the funds; and
for changes in the policies and purposes in the investment of the
assets of the funds.
(d) Any bonds issued pursuant to this article are declared to be
refunding bonds issued for the purpose of redeeming the general
obligation of the municipality issuing said bonds to pay accrued
benefits otherwise payable by the pension fund determined pursuant
to this article not to have sufficient assets to make such
(a) Terms used in this article shall have the meaning ascribed
to them in section two, article one of this chapter and in section
three, article twenty-two of this chapter, unless the context in
which the term is used in this article clearly requires a different
meaning, or the term is defined in subsection (b) of this section.
(b) As used in this article, unless the context clearly requires
a different meaning:
(1) "Actuarial accrued liability" means that portion of the
actuarial present value of the pension fund benefits and expenses
which is allocated to the period ending at the beginning day of the
current plan year by the actuarial cost method.
(2) "Actuarial assumptions" means the demographic actuarial
assumptions and the
economic actuarial assumptions when considered together.
(3) "Actuarial present value" means the value of an amount or
series of amounts payable or receivable at various times, determined as of a given date by the application of a particular
set of actuarial assumptions.
(4) "Actuarial valuation report" means a report that summarizes
the calculations used to determine the normal cost and actuarial
accrued liabilities of a pension fund according to a stated
actuarial cost method and based upon stated demographic and
economic actuarial assumptions, the payment necessary to amortize
over a stated period any unfunded actuarial accrued liability
disclosed, the payment necessary to prevent any increase in any
disclosed unfunded actuarial liability, the actuarial balance sheet
of the pension fund and other relevant financial and demographic
(5) "Actuarial value of assets" means the value of cash,
investments and other property belonging to a pension fund, as used
by an approved actuary for the purpose of preparing an actuarial
(6) "Demographic actuarial assumptions" means estimates of rates
of future occurrences concerning, but not limited to, mortality,
terminations, disabilities and ages at retirement used in the
preparation of actuarial valuations of the pension fund and other
(7) "Economic actuarial assumptions" means estimates of rates of
future occurrences concerning, but not necessarily limited to,
increases in salary, postretirement adjustments and increases in benefits payable and investment earnings, asset appreciation or
depreciation and procedures to determine the actuarial value of
assets used in the preparation of actuarial valuations of the
pension fund and other actuarial calculations.
(8) "Pension fund" means a policemen's pension and relief fund
or firemen's pension and relief fund established pursuant to
article twenty-two of this chapter.
(9) "Pension fund year" means the 12 consecutive month period
applicable to the pension fund which is utilized for various
actuarial and financial purposes and which shall be a fiscal year
commencing on July 1 and ending on June 30.
(10) "Retirement board" means the West Virginia municipal police
and firemen's pension plans retirement board established pursuant
to section four of this article.
(11) "Unfunded actuarial accrued liability" means the excess of
the actuarial accrued liability over the actuarial value of assets,
as determined by a qualified actuary and set forth in an actuarial
§8-22A-4.Issuance of bonds.
(a) Notwithstanding any other provision of this code, a
municipality with a pension fund that is funded less than fifty
percent has the power, as provided by this article, to issue bonds,
from time to time and in one or more series, to fund either (i) the
amount necessary to pay the current annual benefits payable by the pension fund or (ii) the current annual contribution of the
municipality necessary to achieve Tier I status within a reasonable
period of time, not to exceed twenty years.
(b) The aggregate principal amount of bonds issued pursuant to
the provisions of clause (a)(i) above in any fiscal year is limited
to the aggregate principal amount necessary, after deduction of
costs of issuance, underwriter's discount and original issue
discount, if any, to fund the amount necessary to pay the current
annual benefits payable by the pension fund.
(c) The aggregate principal amount of bonds issued pursuant to
the provisions of clause (a)(ii) above in any fiscal year is
limited to the aggregate principal amount necessary, after
deduction of costs of issuance, underwriter's discount and original
issue discount, if any, to fund the current annual contribution of
the municipality necessary to achieve full actuarial funding within
twenty years of the date of issuance.
(d) "Costs of issuance" include, but are not limited to, amounts
necessary to fund any capitalized interest funds and any reserve
funds, any costs relating to the issuance and determination of the
validity of the bonds, fees for obtaining bond insurance, credit
enhancements or liquidity administrative costs, fees incurred
pursuant to subsection (f), section eight of this article, and
costs attributable to the agreements described in section ten of
§8-22A-5. Method of bond issuance.
(a) The bonds shall be authorized by an ordinance enacted by the
governing body of the municipality. The ordinance may authorize
the mayor or other municipal official, on behalf of the
municipality, to enter into a trust indenture or agreement which
shall stipulate the form of the bonds, whether the bonds are to be
issued in one or more series, the date or dates of issue, the time
or times of maturity, which shall not exceed fifteen years for
bonds issued pursuant to clause (a) (i) of section nine of this
article and forty years for bonds issued pursuant to clause (a)
(ii) of section nine of this article, the rate or rates of interest
payable on the bonds, which may be at fixed rates or variable rates
and which interest may be current interest or may accrue, the
denomination or denominations in which the bonds are issued, the
conversion or registration privileges applicable to some or all of
the bonds, the sources and medium of payment and place or places of
payment, the terms of redemption, any privileges of exchangeability
or interchangeability applicable to the bonds, and the entitlement
of bondholders to priorities of payment or security in the amounts
deposited in the pension liability redemption fund. Bonds shall be
signed by the Mayor and any other official designated by ordinance
and attested by the clerk of the municipality, by either manual or
(b) The bonds may be sold at public or private sale at a price
or prices determined by the chief financial officer of the
municipality. The ordinance may authorize the mayor and any other
official of the municipality to enter into any agreements, on
behalf of the municipality, as is necessary or desirable to
effectuate the purposes of this article, including agreements to
sell bonds to any person and to comply with the laws of any
jurisdiction relating thereto.
(c) The trust indenture or agreement authorized in such ordinance
may covenant as to the use and disposition of or pledge of funds
made available for pension benefit payments, pension liability
redemption payments or any reserve funds established pursuant to
such indenture or agreement.
(d) Bonds may be issued without obtaining the consent of any
department, division, commission, board, bureau or agency of the
state and without any other proceedings or the occurrence of any
other conditions or other things other than those actions,
conditions or things which are specifically required by this
(e) Neither the mayor nor the municipal clerk, the chief
financial officer, or any other person executing or attesting the
bonds or any agreement authorized in this article shall be
personally liable with respect to payment of the bonds or any
payments by the pension fund.
(f) Notwithstanding any other provision of this code, the mayor
with the approval of the governing body of the municipality (i)
shall select, employ and compensate one or more persons or firms to
serve as bond counsel or co-bond counsel who shall be responsible
for the issuance of a final approving opinion regarding the
legality of the bonds issued pursuant to this article; (ii) may
select, employ and compensate one or more persons or firms to serve
as underwriter or co-underwriter for any issuance of bonds pursuant
to this article; and (iii) may select, employ and compensate one or
more fiduciaries, financial advisors and experts, other legal
counsel, placement agents, appraisers, actuaries and such other
advisors, consultants and agents as may be necessary to effectuate
the purposes of this article.
§8-22A-6. Contracts with bondholders; provisions of bonds and trust
indentures and other agreements.
(a) The ordinance authorizing the issuance of the bonds may
authorize officials of the municipality to enter into contracts, on
behalf of the municipality, with or for the benefit of bondholders.
(b) In addition and not in limitation to the other provisions of
this section, in connection with any bonds issued pursuant to this
article, the ordinance authorizing the issuance of the bonds may
authorize officials, on behalf of the municipality, to enter into:
(i) commitments to purchase or sell bonds and bond purchase or sale
agreements; (ii) agreements providing for credit enhancement or liquidity, including revolving credit agreements, agreements
establishing lines of credit or letters of credit, insurance
contracts, surety bonds and reimbursement agreements; and (iii) any
other commitments, contracts or agreements necessary or desirable
to issue the bonds.
(c) Any representation, warranty or covenant in any indenture of
trust or trust agreement authorized by the bond ordinance, any bond
or any other contract entered into pursuant to this article with
any bondholder shall be a representation, warranty or covenant made
by the municipality.
§8-22A-7. Proceeds from the sale of bonds.
The proceeds from the sale of bonds issued pursuant to this
article, after payment of any costs of issuance of such bonds,
shall be used to fund either the amount necessary to pay the
current annual benefits payable by the pension fund or the current
annual contribution of the municipality necessary to achieve Level
1 status within a reasonable period of time, not to exceed twenty-
§8-22A-8. Refunding bonds.
(a) Subject to the provisions of the outstanding bonds issued
under this article and subject to the provisions of this article,
the municipality shall have the power to refund any outstanding
bonds, whether the obligation refunded represents principal,
premium or interest, in whole or in part, at any time.
(b) Refunding bonds shall mature at such time or times, which
shall not exceed the longest original term of the bonds as issued,
as provided by an ordinance adopted by the governing body of the
§8-22A-9. Pledges and covenants.
The bond ordinance may authorize the municipality to covenant and
agree with the bondholders, and the indenture may so state, that
the bonds issued pursuant to this article are issued to redeem a
general obligation of the municipality and shall therefore
constitute a direct and general obligation of the municipality;
that the debt service payments on the bonds will be included in
each budget along with all other amounts for payment and discharge
of the principal of and interest on the debt of the municipality;
that the full faith and credit of the municipality is pledged to
secure the payment of the principal of and interest on the bonds;
and that annual taxes shall be collected in an amount sufficient to
pay the debt service payments on the bonds as they become due and
payable. Provided, however, notwithstanding any provision anywhere
to the contrary, any municipality may authorize the issuance of
bonds pursuant to this article that does not pledge the full faith
and credit of the municipality and shall not be a general
obligation of the municipality so long as the municipality pledges
a source of revenues or a special fund to the payment of the debt
service on the bonds.
§8-22A-10. Legal remedies of bondholders.
Any bondholder, except to the extent that the rights given by
this article may be restricted by the municipal ordinance
authorizing the issuance of the bonds or by the trust indenture or
agreement authorized in such ordinance, may by civil action,
mandamus or other proceeding, protect and enforce any rights
granted under this article, or granted by the bond ordinance or by
the trust indenture or agreement authorized in such ordinance, and
may enforce and compel the performance of all duties required by
this article, by the bond ordinance or by the trust indenture or
agreement authorized in such ordinance.
§8-22A-11. Nature of bonds; legal investments.
(a) The bonds issued under the provisions of this article shall
be and have all the qualities of negotiable instruments under the
Uniform Commercial Code of this state and shall not be invalid for
any irregularity or defect in the proceedings for the issuance
thereof, and shall be incontestable in the hands of bona fide
purchasers or holders thereof for value.
(b) Notwithstanding any other provision of this code, the bonds
issued pursuant to this article are securities in which all public
officers and bodies of this state, including the investment
management board, all municipalities and other political
subdivisions of this state, all insurance companies and
associations and other persons carrying on an insurance business, including domestic for life and domestic not for life insurance
companies, all banks, trust companies, societies for savings,
building and loan associations, savings and loan associations,
deposit guarantee associations and investment companies, all
administrators, guardians, executors, trustees and other
fiduciaries and all other persons whatsoever who are authorized to
invest in bonds or other obligations of the state may properly and
legally invest funds, including capital, in their control or
belonging to them.
§8-22A-12. Exemption from taxation.
All bonds issued under the provisions of this article and the
income therefrom shall be exempt from taxation by the state of West
Virginia, or by any county, school district or municipality
thereof, except inheritance, estate and transfer taxes.
§8-22A-13. Legislative review.
Prior to the issuance of the first series of bonds by any
municipality pursuant to this article, such municipality shall
notify the Governor, the President of the Senate and the Speaker of
the House that the municipality has enacted an ordinance
authorizing the issuance of such bonds, that the municipality has
a letter of intent from an underwriter which is willing to purchase
the bonds, that the municipality has received a determination from
the United States Internal Revenue Service as required in section
eighteen of this article, that the municipality has received a preliminary opinion from a law firm which has a national reputation
in the field of municipal law and whose opinions are generally
accepted by the purchasers of municipal securities that the bonds
will not constitute debt within the meaning of any limitation of
the constitution of the state of West Virginia and that the
municipality has complied with all other requirements of this
article and said municipality shall request in such notice that the
legislature adopt a resolution affirming the ability of the
municipality to issue such bonds. No municipality shall issue any
bonds pursuant to the provisions of this article until the
legislature has adopted the resolution referenced in this section.
This section shall not be read to require that subsequent
municipalities desiring to issue bonds pursuant to this article
shall obtain such a resolution from the legislature, or that a
resolution of the legislature shall be obtained prior to the
issuance of subsequent series of bonds by the municipality which
initially obtained the resolution of the legislature.
If any section, subsection, subdivision, subparagraph, sentence
or clause of this article is adjudged to be unconstitutional or
invalid, such adjudication shall not affect the validity of the
remaining portions of this article, and, to this end, the
provisions of this article are hereby declared to be severable.
NOTE: The purpose of this bill is to allow municipalities to
issue bonds for the purpose of making their police and fire plans
This article is new; therefore strike-throughs and underlining