Virginia HB 655: Local fiscal distress; determination by Auditor of Public Accounts, state intervention.

Bill Text

2024SESSION
HOUSESUBSTITUTE
24107504D
1 HOUSEBILLNO.655
2 AMENDMENTINTHENATUREOFASUBSTITUTE
3 (ProposedbytheHouseCommitteeonCounties,CitiesandTowns
4 onFebruary9,2024)
5 (PatronPriortoSubstitute––DelegateCoyner)
6 A BILL to amend and reenact § 15.2-2903 of the Code of Virginia and to amend the Code of Virginia
7 by adding a section numbered 15.2-2512.1, relating to local fiscal distress; state intervention.
8 Be it enacted by the General Assembly of Virginia:
9 1. That § 15.2-2903 of the Code of Virginia is amended and reenacted and that the Code of
10 Virginia is amended by adding a section numbered 15.2-2512.1as follows:
11 § 15.2-2512.1. Local fiscal distress; determination by Auditor of Public Accounts; state
12 intervention.
13 A. For purposes of this section:
14 "Auditor" means the Auditor of Public Accounts.
15 "Emergency fiscal manager" means an official appointed by the Commission on Local Government to
16 implement a remediation plan approved by the Commission under subsection H to restore fiscal health
17 for a locality in the Commonwealth. The "emergency fiscal manager" shall have broad powers to rectify
18 the financial emergency and to assure the fiscal accountability of the locality and the locality's capacity
19 to provide or cause to be provided necessary governmental services essential to the public health, safety,
20 and welfare.
21 "Fiscal distress" means a situation whereby the provision and sustainability of public services, or the
22 ability to appropriately fund financial liabilities, is threatened by various administrative and financial
23 shortcomings, including cash flow issues, inability to pay expenses, revenue shortfalls, deficit spending,
24 structurally imbalanced budgets, billing and revenue collection inadequacies and discrepancies, debt
25 overload, failure to meet obligations to authorities, school divisions, or political subdivisions of the
26 Commonwealth, lack of trained and qualified staff to process administrative and financial transactions,
27 or the inability to timely produce an audited financial report. "Fiscal distress" may be caused by factors
28 internal to the locality or external to the locality, and in various degrees such conditions may or may
29 not be controllable by management or the local governing body or its constitutional officers.
30 B. The Auditor shall use leading indicators based on financial data and relevant nonfinancial factors
31 to develop criteria for a preliminary determination that a locality may be in fiscal distress. Such criteria
32 shall be based upon information regularly collected by the Commonwealth or otherwise regularly made
33 public by the locality and the locality's annual audited financial reporting required to be submitted to
34 the Auditor. Information provided by the Virginia Retirement System, the Virginia Resources Authority,
35 the Virginia Public Building Authority, and other state and regional authorities concerning late or
36 missed payments shall be shared with the Auditor.
37 C. Based upon the criteria established by the Auditor, the Auditor shall establish a prioritized early
38 warning system. Under the prioritized early warning system, the Auditor shall establish a regular
39 process whereby it reviews audited financial data and other relevant factors and qualitative information
40 on at least an annual basis to make a preliminary determination that a locality may meet the criteria
41 for fiscal distress. As part of the early warning system, the Auditor shall use leading financial indicators
42 based on key data from the locality's audited financial reports to evaluate information related to a
43 locality's financial position, financial reserves, debt, and operating revenues and expenditures, along
44 with other relevant factors as applicable. The Auditor shall further evaluate localities that are identified
45 as needing additional evaluation based on their initial financial indicators on the basis of additional
46 leading indicators that may include retirement liabilities, revenue growth, economic and property market
47 value data, reports prepared by the Commission on Local Government on revenue fiscal stress, and
48 other relevant qualitative information.
49 If a locality has not submitted its audited annual financial report, pursuant to §§ 15.2-2510 and
50 15.2-2511, within 18 months of the required December 15 deadline or provided a plan to do so, the
51 Auditor shall notify the Governor, the Secretary of Finance, and the Chairmen of the House Committees
52 on Appropriations and Counties, Cities and Towns and the Senate Committees on Finance and
53 Appropriations and Local Government that the Auditor is unable to review the locality's financial data
54 as part of the early warning system or evaluate its financial condition due to the locality's delay with
55 submitting its audited annual financial report. A locality's inability to timely produce its required
56 audited financial report within 18 months of