ENROLLED
Senate Bill No. 3008
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Passed May 17, 2005; in effect from passage.]
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AN ACT to amend and reenact §8-13C-1 and §8-13C-9 of the Code of
West Virginia, 1931, as amended; and to amend said code by
adding thereto a new section, designated §8-13C-14, all
relating to the use of proceeds from a pension relief
municipal occupational tax, a pension relief municipal sales
and service tax and a pension relief municipal use tax;
providing that amendments shall not be construed to allow
certain taxes; providing circumstances under which a
municipality loses authority to impose certain taxes;
authorizing a qualifying municipality, subject to meeting
certain requirements, to close its existing pension and relief
fund plan for policemen and firemen to those hired after a
future date; authorizing a qualifying municipality, subject to
meeting certain requirements, to establish a defined
contribution plan for policemen and firemen hired on and after
the future date; authorizing a qualifying municipality, subject to meeting certain requirements, to issue revenue
bonds for the purpose of eliminating the unfunded actuarial
accrued liability of the existing pension and relief fund plan
for policemen and firemen and to issue refunding bonds issued
to refund, in whole or in part, bonds issued for that purpose;
requiring that certain disability and health benefits be
provided; and providing for expiration of authority granted by
this enactment.
Be it enacted by the Legislature of West Virginia:
That §8-13C-1 and §8-13C-9 of the Code of West Virginia, 1931,
as amended, be amended and reenacted; and that said code be amended
by adding thereto a new section, designated §8-13C-14, all to read
as follows:
ARTICLE 13C. MUNICIPAL TAX IN LIEU OF BUSINESS AND OCCUPATION
TAX; AND MUNICIPAL TAXES APPLICABLE TO PENSION
FUNDS; ADDITIONAL AUTHORITIES RELATING TO PENSIONS
AND BOND ISSUANCE.
§8-13C-1. Findings.
The Legislature finds that:
(a) Imposing additional taxes creates an extra burden on the
citizens of the state;
(b) Imposing additional taxes can be detrimental to the
economy of the state;
(c) Imposing additional taxes is only proper under certain circumstances;
(d) For many municipalities with severe unfunded liabilities
of the police and fire pension funds, all available sources of
local revenue have been exhausted. Property taxes are at the
maximum allowed by the state Constitution and local business and
occupation taxes and utility taxes are at the maximum rates allowed
by state law. Other fees have reached the economic maximum and are
causing relocation of business outside the municipal boundaries;
(e) For many municipalities with severe unfunded police and
fire pension fund liabilities, revenue from existing sources has
become stagnant over the past few years with no expectation of
significant future growth;
(f) For many municipalities with severe unfunded police and
fire pension fund liabilities, payments required under state law to
fund fire and police pension funds are now close to equaling the
city payrolls for police and fire protection and will rise to
exceed those payrolls within a ten-year period;
(g) For many municipalities with severe unfunded police and
fire pension fund liabilities, payments required under state law to
fund fire and police pension funds now constitute a large
percentage of those municipalities' total budget and will rise to
an even larger percentage of the available revenues in the next ten
years. Payment and benefit levels are dictated to the
municipalities by state law;
(h) As the required pension payments rise, many of the
municipalities with severe unfunded police and fire pension fund
liabilities will find it impossible to maintain at minimum levels
necessary and proper city services including, but not limited to,
police and fire protection, street maintenance and repair and
sanitary services;
(i) For some of the municipalities with severe unfunded
liabilities of the police and fire pension funds, the combination
of the steeply rising pension obligations and the stagnant revenue
sources raise the real possibility of municipal bankruptcy in the
near and predictable future. If this happens, pensioners would
either not receive the full benefits which they have been promised
or pressure would be placed on the state to fund these programs;
(j) For a municipality that has the most severe unfunded
liability in its pension funds, paying off the unfunded liability
in a timely manner would cause tremendous financial hardship and
the loss of many services that would otherwise be provided to the
municipality's citizens;
(k) Only for a municipality that has the most severe unfunded
liability in its pension funds would the imposition of the pension
relief municipal occupational tax, the pension relief municipal
sales and service tax, the pension relief municipal use tax or any
combination of those taxes be an appropriate method of addressing
the unfunded liability;
(l) Only for a municipality that does not impose or ceases to
impose a business and occupation or privilege tax would the
imposition of an alternative municipal sales and service tax and an
alternative municipal use tax be appropriate;
(m) Only for a municipality that has the most severe unfunded
liability in its pension funds would the closure of its existing
pension and relief fund plan for policemen and firemen to those
newly employed and the creation of a defined contribution plan for
newly employed policemen and firemen be appropriate; and
(n) Only for a municipality that has the most severe unfunded
liability in its pension funds, that closes its existing pension
and relief fund plan for policemen and firemen to those newly
employed and that creates a defined contribution plan for newly
employed police officers and firefighters, would the issuance of
bonds to address the unfunded liability of its existing pension and
relief fund plan for policemen and firemen be appropriate.
(o) No amendment to this article enacted during the third
extraordinary session of the Legislature held during calendar year
two thousand five may be interpreted or construed to allow a
municipality to adopt by ordinance a sales or use tax, by whatever
name called, that imposes either tax prior to the first day of
July, two thousand eight.
§8-13C-9. Restriction on use of certain revenues.
(a) All proceeds from a pension relief municipal occupational tax, a pension relief municipal sales and service tax and a pension
relief municipal use tax imposed pursuant to this article shall be
used solely for one of the following purposes:
(1) Directly reducing the unfunded actuarial accrued liability
of policemen's and firemen's pension and relief funds of the
qualifying municipality imposing the tax; or
(2) Meeting the principal, interest and any reserve
requirement obligations of any bonds issued pursuant to section
fourteen of this article.
(b) For any qualifying municipality that chooses to apply the
proceeds from a pension relief municipal occupational tax, a
pension relief municipal sales and service tax, a pension relief
municipal use tax or any permitted combination of these taxes
directly to reducing the unfunded actuarial accrued liability of
policemen's and firemen's pension and relief funds, the qualifying
municipality loses its authority to impose those taxes after:
(1) The municipality fails to annually fund, at a minimum, all
normal costs of the qualifying municipality's policemen's and
firemen's pension and relief funds as determined by the consulting
actuary as provided under section twenty-a, article twenty-two of
this chapter; or
(2) The unfunded actuarial accrued liability of the qualifying
municipality's policemen's and firemen's pension and relief funds
is eliminated; or
(3) Sufficient moneys accrue from the proceeds of the pension
relief municipal occupational tax, the pension relief municipal
sales and service tax, the pension relief municipal use tax or any
permitted combination of these taxes to eliminate the unfunded
actuarial accrued liability of the qualifying municipality's
policemen's and firemen's pension and relief funds.
(c) For any qualifying municipality that chooses to apply the
proceeds from a pension relief municipal occupational tax, a
pension relief municipal sales and service tax, a pension relief
municipal use tax or any permitted combination of these taxes to
the principal, interest and any reserve requirement and arbitrage
rebate obligations on any bonds issued pursuant to section fourteen
of this article, the qualifying municipality loses its authority to
impose those taxes after:
(1) The principal, interest and any reserve requirement and
arbitrage rebate obligations on the bonds issued pursuant to
section fourteen of this article are met;
(2) Sufficient moneys accrue from the proceeds of the pension
relief municipal occupational tax, the pension relief municipal
sales and service tax, the pension relief municipal use tax or any
permitted combination of these taxes to meet the principal,
interest and any reserve requirement and arbitrage rebate
obligations on the bonds issued pursuant to section fourteen of
this article; and
(3) After retirement of bonds issued pursuant to section
fourteen of this article, any unfunded actuarial accrued liability
of the qualifying municipality's pension and relief funds for
policemen and firemen is eliminated.
§8-13C-14. Authorization for closure of existing retirement plans,
creation of defined contribution plans and issuance
of bonds for certain qualifying municipalities.
(a) Notwithstanding any other section of this code to the
contrary and subject to subsection (b) of this section, any
qualifying municipality, as that term is defined in section two of
this article, has the following authority:
(1) To close its existing pension and relief fund plan for
policemen and firemen provided in article twenty-two of this
chapter for policemen and firemen hired on and after a future date
to be set by the governing body of the municipality;
(2) To establish a defined contribution plan for police
officers and firefighters hired on and after the future date set by
the governing body of the municipality to close its existing
pension and relief fund plan for policemen and firemen; and
(3) To issue revenue bonds for the purpose of eliminating the
unfunded actuarial accrued liability of the existing pension and
relief fund plan for policemen and firemen and to issue refunding
bonds issued to refund, in whole or in part, bonds issued for such
purpose.
(b) The authority granted in subsection (a) of this section is
subject to the following:
(1) No qualifying municipality may close an existing pension
and relief fund plan for policemen and firemen pursuant to
subdivision (1), subsection (a) of this section unless:
(A) The qualifying municipality issues revenue bonds for the
purpose of eliminating the unfunded actuarial accrued liability of
the existing pension and relief fund plan for policemen and
firemen; and
(B) The qualifying municipality establishes a defined
contribution plan for police officers and firefighters pursuant to
subdivision (2), subsection (a) of this section;
(2) No qualifying municipality may establish a defined
contribution plan for police officers and firefighters pursuant to
subdivision (2), subsection (a) of this section unless:
(A) The qualifying municipality closes its existing pension
and relief fund plan for policemen and firemen pursuant to
subdivision (1), subsection (a) of this section; and
(B) The qualifying municipality issues revenue bonds for the
purpose of eliminating the unfunded actuarial accrued liability of
the existing pension and relief fund plan for policemen and
firemen;
(3) No qualifying municipality may issue bonds pursuant to
subdivision (3), subsection (a) of this section unless:
(A) The qualifying municipality closes its existing pension
and relief fund plan for policemen and firemen pursuant to
subdivision (1), subsection (a) of this section; and
(B) The qualifying municipality establishes a defined
contribution plan for police officers and firefighters pursuant to
subdivision (2), subsection (a) of this section;
(4) No qualifying municipality may exercise any authority
provided in subsection (a) of this section unless it obtains a
determination of the unfunded actuarial accrued liability of its
existing pension and relief fund plans for policemen and firemen
from the State Treasurer;
(5) If the qualifying municipality elects to issue bonds
pursuant to subdivision (3), subsection (a) of this section, the
following applies:
(A) The proceeds of the revenue bonds shall be at least equal
to the unfunded actuarial accrued liability as determined by the
State Treasurer plus any reserve fund requirements and any costs,
including accrued or capitalized interest, associated with issuing
the bonds. All of the proceeds shall be applied to the payment of
the unfunded actuarial accrued liability, the funding of reserve
requirements and the payment of costs associated with the issuance
of the bonds and may not be used for any other purpose;
(B) The proceeds of any refunding bonds shall be used to
refund all or any portion of the revenue bonds authorized in this section, to fund any required reserve requirements for the
refunding bonds and to pay costs of issuance associated with the
refunding bonds and for no other purpose; and
(C) Notwithstanding any other provision of this code to the
contrary, the proceeds of the bonds or refunding bonds shall be
invested with the West Virginia Investment Management Board
established under the provisions of article six, chapter twelve of
this code.
(6) If the qualifying municipality elects to issue bonds
pursuant to subdivision (3), subsection (a) of this section, the
qualifying municipality shall impose a pension relief municipal
occupational tax, a pension relief municipal sales and service tax,
a pension relief municipal use tax or any permitted combination of
these taxes at a rate projected to generate sufficient revenue to
meet the principal, interest and any reserve requirement and
arbitrage rebate obligations on the bonds, subject to the
following:
(A) This requirement is void after the qualifying municipality
loses its authority to impose those taxes pursuant to subsection
(b) or (c), section nine of this article; and
(B) If the revenue generated by a pension relief municipal
occupational tax, a pension relief municipal sales and service tax
and a pension relief municipal use tax is insufficient to meet the
principal, interest and any reserve requirement and arbitrage rebate obligations on the bonds, the qualifying municipality shall
not issue the bonds;
(7) If the qualifying municipality elects to issue bonds
pursuant to subdivision (3), subsection (a) of this section, all
proceeds from a pension relief municipal occupational tax, a
pension relief municipal sales and service tax, a pension relief
municipal use tax or any permitted combination of these taxes shall
be dedicated solely to paying the principal, interest and any
reserve requirement and arbitrage rebate obligations on the bonds;
(8) If the qualifying municipality elects to close an existing
pension and relief fund plan for policemen and firemen pursuant to
subdivision (1), subsection (a) of this section, all current and
retired employees in the existing pension and relief fund plans for
policemen and firemen shall remain in that plan and shall be paid
all benefits of that plan in accordance with Part III, article
twenty-two of this chapter;
(9) Any such revenue bonds or refunding bonds shall bear
interest at not more than twelve percent per annum, payable
semiannually, or at shorter intervals, and shall mature at such
time or times, not exceeding thirty years, as may be determined by
the ordinance authorizing the issuance of the bonds. The bonds may
be made redeemable before maturity, at the option of the
municipality at not more than the par value thereof, plus a premium
of not more than five percent, under such terms and conditions as may be fixed by the ordinance authorizing the issuance of the
bonds. The principal and interest of the bonds may be made payable
in any lawful medium. The ordinance shall determine the form of
the bonds and shall set forth any registration or conversion
privileges, and shall fix the denomination or denominations of such
bonds, and the place or places of the payment of principal and
interest thereof, which may be at any banking institution or trust
company within or without the state. The bonds shall contain a
statement on their face that the municipality shall not be
obligated to pay the same, or the interest thereon, except from the
special fund derived from revenues collected by the municipality
from the imposition of a pension relief municipal occupational tax,
a pension relief municipal sales and service tax, a pension relief
municipal use tax or any permitted combination of these taxes and
which the municipality may pledge as security for the bonds. All
the bonds shall be, and shall have and are hereby declared to have
all the qualities and incidents of negotiable instruments, under
the Uniform Commercial Code of the state. The bonds shall be
executed in such manner as the governing body of the municipality
may direct. The bonds shall be sold by the municipality in such
manner as may be determined to be for the best interest of the
municipality. Any surplus of the bond proceeds over and above the
cost of paying the unfunded liability, plus any amount required for
reserves, capitalized interest and costs of issuance thereof or in the case of refunding bonds over and above the amount necessary to
refund the existing bonds being refunded by such issue, plus any
amount required for reserves, capitalized interest and costs of
issuance thereof, shall be paid into the debt service fund for such
bonds; and
(10) The defined contribution plan established by the
municipality shall:
(A) Meet the federal qualification requirements of 26 U. S.
C. §401 and related sections of the Internal Revenue Code as
applicable to governmental plans;
(B) Set the amount of each employee's contribution and the
amount of each employer's contribution;
(C) Require that the amount of annuity payments a retired
member receives be based solely upon the balance in the member's
annuity account at the date of retirement, the retirement option
selected, or in the event of an annuity option being selected, the
actuarial life expectancy of the member of any other factors that
normally govern annuity payments;
(D) Include detailed provisions that require the prudent and
safe handling of the retirement funds;
(E) Provide retirement options; and
(F) Include any other provision and authorize any policy that
the qualifying municipality determines is necessary or incidental
to the establishment and operation of the defined contribution plan. The other provisions may include, but are not limited to,
the authorization to contract with one or more private pension,
insurance, annuity, mutual fund or other qualified company or
companies to administer the day-to-day operations of the plan and
to provide investments.
(c) If a qualifying municipality elects to establish a defined
contribution plan pursuant to subdivision (2), subsection (a) of
this section, the qualifying municipality shall also establish by
ordinance mechanisms to provide disability benefits and death
benefits for eligible members.
(d) The authority granted to a qualifying municipality
pursuant to subsection (a) of this section to close its existing
pension and relief fund plan for police officers and firefighters,
to establish a defined contribution plan for police officers and
firefighters and to issue revenue bonds shall terminate on the
thirty-first day of December, two thousand five.
(e) The right of any person to a benefit provided under a
defined contribution plan established by a qualifying municipality
pursuant to this section shall not be subjected to execution,
attachment, garnishment, the operation of bankruptcy or insolvency
laws, or other process whatsoever nor shall any assignment thereof
be enforceable in any court with the exception that the benefits or
contributions under the plan shall be subject to "qualified
domestic relations orders" as that term is defined in 26 U. S. C. §414 with respect to governmental plans.
(f) The interest earned on any bonds issued under the
authority granted in this section is exempt from any tax imposed
under the provisions of this code.
(g) Bonds and refunding bonds issued pursuant to the authority
provided by this section shall never constitute a direct and
general obligation of the State of West Virginia and the full faith
and credit of the state is not pledged to secure the payment of the
principal and interest of such bonds. Bonds and refunding bonds
issued under this section shall state on their face that the bonds
or bonds do not constitute a debt of the State of West Virginia and
that payment of the bonds, interest and charges thereon cannot
become an obligation of the State of West Virginia.
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