STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6090

August 5, 1982

BONDS:

Levy of taxes to meet debt service on school district operating deficit bonds

SCHOOLS AND SCHOOL DISTRICTS:

Approval of school electors to authorize borrowing money and issuing deficit financing bonds

Operating deficit notes or bonds may not be issued by a school district without prior approval of the electors of the school district.

A school district must levy taxes, without limitation as to rate or amount, sufficient to meet debt service on operating deficit notes or bonds issued upon approval of the school electors of the school district. The rate of the taxes levied may vary from year to year depending upon the debt service requirement and the state equalized valuation of the school district for the particular year.

Honorable Donald E. Bishop

State Senator

The Capitol

Lansing, Michigan 48909

You have requested my opinion on two questions with respect to the School Code of 1976, 1976 PA 451, Sec. 1356, as amended by 1981 PA 143; MCLA 380.1356; MSA 15.41356, which authorizes a school district having or projecting an operating deficit in excess of $100.00 per membership pupil to borrow money and issue notes or bonds to retire the deficit over a period of years under conditions set forth in the Act. 1981 PA 143, supra, does not contain an express requirement for prior approval of the school electors. In your first question you ask:

1976 PA 451, Sec. 1356, supra, confers authority upon a school district to levy taxes for such notes or bonds, as follows:

Under this provision, a school district is required to levy debt service taxes for such obligations without limitation as to rate or amount.

A predecessor provision, 1955 PA 269, Sec. 681, as amended by 1973 PA 1, empowered school districts with certain operating or projected operating deficits to borrow moneys and issue notes or bonds for the purpose of funding the deficit without a vote of the electors and authorizing, inter alia, the school district to levy certain taxes to pay principal and interest due on such obligations without approval of the school electors. This statute was declared to be constitutional under test of Const 1963, art 9, Sec. 6, in Advisory Opinion re Constitutionality of 1973 PA 1 and 2, 390 Mich 166; 211 NW2d 28 (1973). 1955 PA 269, Sec. 681 was repealed by 1976 PA 451, Sec. 1851(h); MCLA 380.1851; MSA 15.41851.

Const 1963, art 9, Sec. 6 was amended by the people at the general election in 1978 to restrict the unlimited levy of taxes for bonded debt only for indebtedness voted by the electors.

A constitutional construction should be given to 1976 PA 451, Sec. 1356, supra, People v Neumayer, 405 Mich 341; 275 NW2d 230 (1979), by viewing the statutory authority of a school district to borrow money and issue notes or bonds for the operating indebtedness as being subject to approval of the electors, thus permitting unlimited taxes to be levied to pay principal and interest on such indebtedness in conformity with Const 1963, art 9, Sec. 6, as amended.

It is my opinion, therefore, that deficit financing bonds or notes may not be issued by a school district pursuant to 1976 PA 451, Sec. 1356, supra, without prior approval of the electors of the school district.

In your second question you ask:

Since 1976 PA 451, Sec. 1356, supra, requires an unlimited tax levy, the question to be put to the electors would be: Shall the school district borrow money and issue such notes or bonds and levy taxes without limitation as to rate or amount to retire the operational debt?

Const 1963, art 9, Sec. 6, as amended, authorizes a school district, to levy taxes without limitation as to rate or amount to pay principal and interest on bonded indebtedness voted by the school electors. If approved by the electors, the district would be authorized to levy such taxes, without limitation as to rate or amount, as are necessary to meet debt service on such notes or bonds each year. The Municipal Finance Act, 1943 PA 202, c 7, Sec. la; MCLA 137.1a; MSA 5.3188(45a), sets forth the duties of officials in connection with tax levies for outstanding bonds and the calculation of the amount of the levy.

In response to your second question, it is my opinion that a school district, which has borrowed money and issued notes or bonds to pay for an operating deficit or a projected operating deficit, would be empowered to, and would be required to, levy taxes, without limitation as to rate or amount, sufficient to meet debt service on the notes or bonds each year. Such levy may vary in amount from year to year depending upon each year's debt service requirements and depending upon the state equalized valuation of the school district for the particular year.

Frank J. Kelley