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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6388 September 19, 1986 STATE TREASURER: Duty to remit to county moneys belonging to municipality in default to county for services The Legislature has imposed a duty upon the State Treasurer to transfer to a county certain moneys in his possession belonging to a municipality which is in default to the county for services rendered as provided in the contract between the county and the municipality and subject to limitations contained in the county department of public works act. Mr. Robert A. Bowman State Treasurer Treasury Building Lansing, MI 48901 You have requested my opinion concerning the responsibilities of the State Treasurer for deducting state funds payable to a municipality and turning them over to a county where that municipality has entered into a financing, construction and operating contract with a county pursuant to MCL 123.731 et seq; MSA 5.570(1) et seq, and has agreed that in event of default state moneys belonging to the municipality may be withheld and paid to the county. Such contracts are authorized by MCL 123.742(1); MSA 5.570(12)(1), which provides, in relevant part: "A county operating under this act and any 1 or more municipalities ... may enter into a contract ... for the acquisition, improvement, enlargement, or extension of ... sewage disposal ... systems and for the payment of the cost thereof by the contracting municipalities, with interest, over a period not exceeding 40 years." MCL 123.747; MSA 5.570(17), permits counties and municipalities to provide by contract that if a municipality fails to pay amounts due the county under a contract for sewage disposal, upon proper notice of default by the county to the State Treasurer, the State Treasurer is directed to deduct certain funds in the possession of the State Treasurer belonging to the municipality up to specified amounts for subsequent transfer to the county: "A contract or assessment made under this act may provide that if a municipality shall fail to pay to a county operating under this act any amount required to be paid under any contract or assessment when due, then the county treasurer shall notify the state treasurer, or other appropriate disbursing official, who is hereby directed to deduct the amount from any moneys in his possession belonging to the municipality which are not pledged to the payment of debts, but the state treasurer or other official shall not withhold in any 1 year a sum greater than 25% of the total amount owed the county by the delinquent municipality as stated in the notice from the county treasurer. Nothing in this section shall permit the deduction of moneys in contravention of the constitution, but a municipality itself may authorize, in any contract with a county operating under this act, the deduction and transfer from moneys derived from unrestricted state funds returnable to the municipality...." According to MCL 123.747; MSA 5.570(17), the requirements for the State Treasurer's deduction of a municipality's money in the possession of the State Treasurer and transfer of that money to a county are: (1) a contract between the municipality and the county pursuant to MCL 123.731 et seq; MSA 5.570(1) et seq, (2) a contractual provision for the deduction by which the municipality authorizes the deduction and transfer from moneys derived from unrestricted state funds, (3) a municipality's failure to pay any amount under such contract when due, (4) notification to the state treasurer of the amount due by the county treasurer, (5) no deductions from moneys pledged by the municipality to the payment of its debts, and (6) no deduction in any one year of a sum greater than 25% of the total amount owed to the county by the delinquent municipality as stated in the notice from the county treasurer. It should be noted that when these requirements are satisfied the State Treasurer is required to make these deductions by the specific language of the statute, e.g., "hereby directed to deduct the amount from any moneys in his possession belonging to the municipality." Section 28 of the contract between Wayne County and the various municipalities for the South Huron Valley Wastewater Control System implements the requirements of MCL 123.747; MSA 5.570(17), as follows: "In the event any Local Unit party hereto shall fail for any reason to pay to Wayne at the times specified herein the amounts required to be paid by the provisions of this contract, for rates or for its share of the costs of the Project as evidenced by bonds of Wayne, Wayne shall immediately give notice of such default and the amount thereof, in writing, to the Local Unit Treasurer, the appropriate County Treasurer, the Treasurer of the State of Michigan, and such other officials charged with disbursement to such party of funds returned by the State and now or hereafter under Michigan law available for pledge as provided in this paragraph, and if such default is not corrected within ten (10) days after such notification, the State Treasurer, or other appropriate official charged with disbursement to the party of the aforesaid funds, is, by these presents, specifically authorized by the party, to the extent permitted by law, to withhold from the aforesaid funds the maximum amount necessary to cure said deficit and to pay said sums so withheld to Wayne, to apply on the obligations of the party as herein set forth. Any such moneys so withheld and paid shall be considered to have been paid to the party within the meaning of the Michigan Constitution and statutes, the purpose of this provision being to voluntarily pledge and authorize the use of said funds owing to the party to meet any past-due obligations of the party due under the provision of this contract.... No party shall take any action to reduce the right of Wayne to receive the aforesaid state-returned moneys in the event of default." Your specific question with regard to these provisions is: "Do counties and municipalities have the legal right to enter into an agreement requiring action by the State Treasurer when the State Treasurer is not a party to said agreement?" The foregoing discussion of the statutory provisions governing these contracts between municipalities and counties for sewage disposal facilities has outlined the circumstances under which these types of deductions by the State Treasurer may occur. It is also evident that the obligation of the State Treasurer to make these deductions arises out of an express statutory duty, rather than out of a contractual agreement to which the State Treasurer is not a party. It is my opinion, therefore, that when a county and a municipality authorized by MCL 123.742(1); MSA 5.570(12)(1), enter into a contract for sewage disposal facilities which includes a provision authorizing the State Treasurer, upon proper notice of the failure of the municipality to pay the county under the contract, to deduct certain moneys belonging to the municipality in the State Treasurer's possession, MCL 123.747; MSA 5.570(17), by its terms, directs the State Treasurer to deduct such moneys up to certain specified limitations and transfer those moneys to the county. Frank J. Kelley Attorney General
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