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On December 29, 2020, Governor Whitmer signed House Bill 5126 and House Bill 5504 to provide updates to the Michigan Drain Code. House Bill 5126 modernizes certain procedures in the Drain Code of 1956. That same bill also corrects internal inconsistencies within Section 135 of the Drain Code created as a result of recent amendments. House Bill 5504 extends the maximum financing and assessment period for non-petitioned maintenance assessments on drainage projects and requires sealed bids for such projects. The bill also increases the threshold for obtaining municipal finance approval for loans.

House Bill 5126 (PA 281 of 2020) goes into effect on March 29, 2021.  House Bill 5504 (Public Act 291 of 2020) goes into effect on March 24, 2021.  There has been some confusion as to the effective date because the Legislature’s website incorrectly stated that both chambers voted to give HB 5504 immediate effect.  However, the Senate never actually gave immediate effect.  We have confirmed the effective date of HB 5504/PA 291 with the House Clerk and the Legislative Council.

Modernization and Consistency of the Drain Code

On July 7, 2020, the Michigan House of Representatives voted to pass House Bill 5126 to modernize Drain Code procedures and fix inconsistencies within the Code. The Michigan Senate voted to pass the bill on December 12, 2020. The governor signed the bill into law on December 29, 2020.  This bill was assigned as PA 281 of 2020, and it will go into effect on March 29, 2021.

PA 281 of 2020 (HB 5126) makes the following changes to the Drain Code:

• Bid information for drainage projects must now be advertised on a Drain Commissioner’s county website, rather than in notices to property owners.

• Day of Review Notices to property owners will now occur after the project is bid and must now include an estimate of apportionment and assessment for drainage projects.

• Section 135 is now internally consistent. The requirements for petitions to add and remove counties from an intercounty drain are now consistent with the requirements for petitions for maintenance and improvement of an intercounty drain.

These changes reflect both a desire for consistency within the Drain Code and a recognition that the requirements for notice to property owners regarding bids and assessments have not been substantially updated in at least 125 years, during which time it has become much less common for property owners themselves to bid on the work affecting their property.

Extension of Financing Period for Non-Petitioned Maintenance

Only July 22, 2020, the Michigan House of Representatives voted to pass House Bill 5504 to extend the maximum period over which non-petitioned maintenance financing and assessments can be spread. On December 16, the Michigan Senate voted to pass the bill with a substitute, with which the House of Representatives concurred. On December 29, 2020 the governor signed the bill into law. This bill was assigned as PA 291 of 2020, and it goes into effect on March 24, 2021.

PA 291 of 2020 (HB 5504) also amends the Drain Code as follows:

• Annually, Drain Commissioners must prepare, maintain, and make available on their websites or the county’s website a list of all drainage districts being assessed for maintenance work, including both the drain name and the annual assessment amount.

• The costs of inspection, maintenance, and repair of a drain under Section 196 may be financed and assessed over a period of up to 10 years.

• A Drain Commissioner / Drainage Board may not levy a second assessment for drain maintenance until the initial maintenance assessment period is over, with limited exceptions for emergencies and approval by affected municipalities.

• In order to spend funds to alleviate an emergency condition, a Drain Commissioner / Drainage Board must enter an order declaring and describing the emergency.

• A Drain Commissioner / Drainage Board must receive sealed bids for non-petitioned maintenance, with an exception if the work is performed by county staff or a prequalified contractor.

• A Drain Commissioner / Drainage Board must prepare, maintain, and make available on their website or the county’s website a list of prequalified contractors.

• Notification of abandonment of a petition must be provided to those who own land within a drainage district either by publishing in a newspaper or by mailing notice to landowners within the drainage district, rather than the previous requirement of notice by publishing in a newspaper only.

• The threshold for obtaining municipal finance approval for loans is increased to $600,000, rather than the $300,000 previously allowed.

• Advances or loans made by a public corporation or the federal government are not subject to the Revised Municipal Finance Act or the Agency Financing Reporting Act.

The enacting of PA 291 of 2020 (HB 5504) provides Drain Commissioners with discretion to spread the cost of drain maintenance out for a longer period, making it more affordable for property owners. The bill also reflects an attempt at increased transparency regarding drain maintenance.

Bottom Line

In summation, PA 281 of 2020 (HB 5126) and PA 291 of 2020 (HB 5504) require the following of Drain Commissioners:

Starting March 24, 2021:

• You may finance the costs of and spread an assessment under Section 196 over a period of up to 10 years.

• You must enter an order to expend funds to perform emergency work.

• You must receive sealed bids for non-petitioned maintenance, unless:

• Using county staff, or

• A prequalified contractor after your office has adopted a prequalified criteria policy and has a list of prequalified contractors posted to either your website or your county’s website.

• You may obtain loans of up to $600,000 without municipal finance approval.

• Annually, you must post a list of drainage districts being assessed for maintenance work on either your website or your county’s website.

Starting March 29, 2021:

• You must post bid information on either your website or your county’s website.

• You must include an estimate of apportionment and assessment on property owner notices.

As always, we will continue to monitor Drain Code legislation and other legislation affecting Drain Commissioners. Please contact Fahey Schultz Burzych Rhodes PLC with any questions or concerns.