June 15, 2010, Introduced by Senators SWITALSKI and JELINEK and referred to the Committee on Appropriations.
A bill to amend 2005 PA 92, entitled
"School bond qualification, approval, and loan act,"
by amending sections 3, 4, 5, 6, 7, 8, 9, 11, 13, 16, and 18 (MCL
388.1923, 388.1924, 388.1925, 388.1926, 388.1927, 388.1928,
388.1929, 388.1931, 388.1933, 388.1936, and 388.1938), section 9 as
amended by 2009 PA 50.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 3. As used in this act:
(a) "Computed millage" means the number of mills in any year,
not less than 7 mills and not more than 13 mills, determined on the
date of issuance of the order qualifying the bonds or on a later
date if requested by the school district and approved by the state
treasurer, that, if levied by the school district, will generate
sufficient annual proceeds to pay principal and interest on all the
school district's qualified bonds plus principal and interest on
all qualified loans related to those qualified bonds no later than
the
applicable final mandatory
repayment date. specified
in the
note
and repayment agreement entered into by the school district
under
this act. The computed
millage may be redetermined from time
to time by the state treasurer based on changes of circumstances
such as additional bond qualification, refundings, changes in
qualified loan interest rates, and taxable values.
(b) "Final mandatory repayment date" means the final mandatory
repayment date determined by the state treasurer under section 9.
(c) (b)
"Qualified bond" means a
bond that is qualified under
this act for state loans as provided in section 16 of article IX of
the state constitution of 1963. A qualified bond includes the
interest amount required for payment of a school district's net
interest obligation under an interest rate exchange or swap, hedge,
or other agreement entered into pursuant to the revised municipal
finance act, 2001 PA 34, MCL 141.2101 to 141.2821, but does not
include a termination payment or similar payment related to the
termination or cancellation of an interest rate exchange or swap,
hedge, or other similar agreement. A qualified bond may include a
bond issued to refund loans owed to the state under this act.
(d) (c)
"Qualified loan" means a
loan made under this act or
former
1961 PA 108 , MCL
388.951 to 388.963, from this state
to a
school district to pay debt service on a qualified bond.
(e) (d)
"Revolving loan fund"
means the school loan revolving
fund created under section 16c of the shared credit rating act,
1985 PA 227, MCL 141.1066c.
(f) (e)
"School district" means a
general powers school
district organized under the revised school code, 1976 PA 451, MCL
380.1 to 380.1852, or a school district of the first class as
described in the revised school code, 1976 PA 451, MCL 380.1 to
380.1852, having the power to levy ad valorem property taxes.
(g) (f)
"State treasurer" means
the state treasurer or his or
her duly authorized designee.
(g)
"Superintendent of public instruction" means the
superintendent
of public instruction appointed under section 3 of
article
VIII of the state constitution of 1963.
(h) "Taxable value" means the value determined under section
27a
of the general property tax act, 1893 PA 206, MCL 211.1 to
211.157
211.27a.
Sec. 4. (1) A school district may issue and market bonds as
qualified bonds if the state treasurer has issued an order granting
qualification under this act.
(2) Except with regard to qualification of new bonds, nothing
in this act shall be construed to alter the terms and conditions
applicable to outstanding qualified bonds issued in accordance with
former
1961 PA 108. ,
MCL 388.951 to 388.963, and the loans
associated
with those qualified bonds. Unless
otherwise amended as
permitted by this act, outstanding qualified loans incurred in
association with outstanding qualified bonds described in this
subsection
shall continue to bear interest and as provided in
section 9(8) but otherwise shall be due and payable as provided in
the repayment agreements entered into between the school district
and the state before the effective date of this act.
(3) The state treasurer may qualify bonds for which the state
treasurer has received an application for prequalification on or
before May 25, 2005 without regard to the requirements of section
5(2)(f) if the electors of the school district approve the bonds at
an election held during 2005.
Sec. 5. (1) A school district may apply to the state treasurer
for preliminary qualification of a proposed school bond issue by
filing an application in the form and containing the information
required by this act.
(2) An application for preliminary qualification of a school
bond shall contain all of the following information:
(a) The proposed ballot language to be submitted to the
electors.
(b) A description of the project or projects proposed to be
financed.
(c) A pro forma debt service projection showing the estimated
mills the school district will levy to provide revenue the school
district will use to pay the qualified bonds, any outstanding
qualified bonds, and any outstanding or projected qualified loans
of the school district. For the purpose of the pro forma debt
service projection, the school district may assume for the first 5
years following the date of the application the average growth or
decline in taxable value for the 5 years preceding the date of the
application and the lesser of that average growth or decline rate
or 3% for the remaining term of the proposed bonds unless the state
treasurer has issued a guideline based on current economic or
fiscal conditions containing different assumptions in which case
the assumptions contained in such guideline shall be used.
(d) Evidence that the rate of utilization of each project to
be financed will be at least 85% for new buildings and 60% for
renovated facilities. If the projected enrollment of the district
would not otherwise support utilization at the rates described in
this subsection, the school district may include an explanation of
the actions the school district intends to take to address the
underutilization, including, if applicable, actions to close school
buildings or other actions designed to assure continued assured use
of the facilities being financed.
(e) Evidence that the cost per square foot of the project or
projects will be reasonable in light of economic conditions
applicable to the geographic area in which the school district is
located.
(f) Evidence that the school district will repay all
outstanding qualified bonds, the proposed qualified bonds, all
outstanding
qualified loans, at
the times described in section 9
and all qualified loans expected to be incurred with respect to all
qualified bonds of the school district, including the proposed
qualified bond issue, not later than the applicable final mandatory
repayment date.
(g)
The weighted average age of all school buildings in the
school
district based on square footage.
(g) (h)
The overall utilization rate of all
school buildings
in the school district, excluding special education purposes.
(i)
The taxable value per pupil.
(h) (j)
The total bonded debt outstanding
of the school
district and the total taxable value of property in the school
district for the school district fiscal year in which the
application is filed.
(i) (k)
A statement describing any
environmental or usability
problems to be addressed by the project or projects.
(j) (l) An
architect's analysis of the overall condition of the
facilities to be renovated or replaced as a part of the project or
projects.
(k) (m)
An amortization schedule demonstrating
that the
weighted average maturity of the qualified bond issue does not
exceed 120% of the average reasonably expected useful life of the
facilities, excluding land and site improvements, being financed or
refinanced with the proceeds of the qualified bonds, determined as
of the later of the date on which the qualified bonds will be
issued or the date on which each facility is expected to be placed
in service.
(l) An agreement that the school district will keep books and
records detailing the investment and expenditure of the proceeds of
the qualified bonds and, at the request of the state treasurer, the
school district will promptly, but not later than the date
specified in the request, which date shall be not less than 5
business days after the date of the request, submit information
requested by the state treasurer related to the detailed
information maintained by the school district as to the investment
and expenditure of the proceeds of its qualified bonds.
Sec.
6. The state treasurer shall may prequalify
bonds of a
school district if the state treasurer determines all of the
following:
(a) The issuance of additional qualified bonds will not
prevent the school district from repaying its outstanding qualified
bonds,
the proposed bonds, all outstanding qualified loans, on the
earlier
of the dates described in section 9 and all
qualified loans
expected to be incurred with respect to all qualified bonds of the
school district, including the proposed bond issue, not later than
the applicable final mandatory repayment date.
(b) The form and language of the ballot has been approved by
the state treasurer and conforms with the requirements of this act.
(c) The school district has filed an application complying
with the requirements of section 5.
(d) If the proposed bond issue will result in additional
qualified loans, the outstanding balance of all qualified loans on
the most recent May 1 or November 1 did not exceed
$1,200,000,000.00.
(e) The issuance of additional qualified bonds will not have
an adverse financial impact on the school district, this state, or
the school loan revolving fund. In making this determination, the
state treasurer shall consider relevant factors, including, but not
limited to, whether the issuance of the proposed bond issue will
cause the aggregate outstanding amount of qualified and
nonqualified bonds, including the proposed bond issue, and
currently outstanding qualified loans of the school district to
exceed 25% of the taxable value of the school district at the time
the proposed bonds are issued.
Sec.
7. (1) The state treasurer shall may qualify bonds of a
school district if the state treasurer determines all of the
following:
(a) A majority of the school district electors have approved
the bonds.
(b) The terms of the bond issue comply with applicable
provisions of the revised school code, 1976 PA 451, MCL 380.1 to
380.1852.
(c) The school district is in compliance with the revised
municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.
(d) The weighted average maturity of the qualified bond issue
does not exceed 120% of the average reasonably expected useful life
of the facilities, excluding land and site improvements, being
financed or refinanced with the proceeds of the bonds, determined
as of the later of the date on which the qualified bonds will be
issued or the date on which each facility is expected to be placed
in service.
(e) The school district has filed any information necessary to
update the contents of the original application to reflect changes
in any of the information approved in the preliminary qualification
process.
(f)
The school district has paid a qualification fee of not
less
than $3,000.00 or the amount determined by the state
treasurer,
which shall be approximately equal to the amount
required
to pay the estimated administrative expenses incurred
under
this act for the fiscal year in which the state treasurer
imposes
the fee. The school district has agreed that the school
district will keep books and records detailing the investment and
expenditure of the proceeds of the qualified bonds and, at the
request of the state treasurer, the school district will promptly,
but not later than the date specified in the request, which date
shall be not less than 5 business days after the date of the
request, submit information requested by the state treasurer
related to the detailed information maintained by the school
district as to the investment and expenditure of the proceeds of
its qualified bonds.
(2) An order qualifying bonds shall specify the principal and
interest payment dates for all the bonds, the maximum principal
amount of and maximum interest rate on the bonds, the computed
millage,
if any, the final mandatory repayment date, for any loans
made
with respect to those bonds, and
other matters as the state
treasurer shall determine or as are required by this act.
(3) If the application for prequalification demonstrates that
the school district will borrow from this state in accordance with
this act, the state treasurer and the school district shall enter
into a loan agreement setting forth the terms and conditions of any
qualified loans to be made to the school district under this act.
(4) If a school district does not issue its qualified bonds
within 180 days after the date of the order qualifying bonds, the
order shall no longer be effective. However, the school district
may reapply for qualification by filing an application and
information necessary to update the contents of the original
application for prequalification or qualification.
(5)
The state treasurer shall may qualify
refunding bonds
issued to refund qualified loans or qualified bonds if the state
treasurer
finds that the all of the following are
met:
(a) The refunding bonds comply with the provisions of the
revised municipal finance act, 2001 PA 34, MCL 141.2101 to
141.2821.
(b) That the school district will repay all outstanding
qualified bonds, the proposed qualified bonds, all outstanding
qualified loans, and all qualified loans expected to be incurred
with respect to all qualified bonds of the school district,
including the proposed qualified bond issue, not later than the
applicable final mandatory repayment date.
(c) That the refunding will be financially beneficial to this
state.
Sec. 8. A ballot submitted to the school electors of a school
district after November 8, 2005 requesting authorization to issue
unlimited tax general obligations that will be guaranteed by this
state in accordance with section 16 of article IX of the state
constitution of 1963 shall inform the electors that if the school
district
borrows expects to borrow from this state to pay debt
service
on the bonds, the school district may be required to
continue
to levy mills beyond the term of the bonds to repay this
state
the estimated total amount of
the principal of that borrowing
and the interest to be paid on that borrowing, the estimated
duration of the millage levy, and the estimated computed millage
rate for that levy.
Sec. 9. (1) Except as otherwise provided in this act, a school
district may borrow from the state an amount not greater than the
difference between the proceeds of the school district's computed
millage and the amount necessary to pay principal and interest on
its qualified bonds, including any necessary allowances for
estimated tax delinquencies.
(2) For school districts having qualified loans outstanding as
of July 20, 2005, the state treasurer shall review information
relating to each school district regarding the taxable value of the
school district and the actual debt service of outstanding
qualified bonds as of July 20, 2005 and shall issue an order
establishing the payment date for all those outstanding qualified
loans and any additional qualified loans expected to be incurred by
those school districts related to qualified bonds issued before
July 20, 2005. The payment date shall be not later than 72 months
after the date on which the qualified bonds most recently issued by
the school district are due and payable. The payment date
established pursuant to this subsection for a school district is a
final mandatory repayment date.
(3) For qualified loans related to qualified bonds issued
after July 20, 2005, the qualified loans shall be due on the date
determined by the state treasurer, but not later than 72 months
after the date on which the qualified bonds for which the school
borrowed from this state are due and payable. The due date
determined pursuant to this subsection for a school district is a
final mandatory repayment date. This section does not preclude
early repayment of qualified bonds or qualified loans.
(4)
Except with regard to qualified loans described in
subsection
(2), each loan made or considered made to a school
district
under this act shall be for debt service on only a
specific
qualified bond issue. The state
treasurer shall maintain
separate accounts for each school district on the books and
accounts of this state noting the qualified bond, the related
qualified loans, the final payment date of the bonds, the final
payment
mandatory repayment date of the qualified loans, and the
interest rate accrued on the loans.
(5) For qualified loans relating to qualified bonds issued
after July 20, 2005, a school district shall continue to levy the
computed
mills millage until it has completely repaid all principal
and interest on its qualified loans.
(6) For qualified loans relating to qualified bonds issued
before July 20, 2005, a school district shall continue to comply
with the levy and repayment requirements imposed before July 20,
2005. Not less than 90 days after July 20, 2005, the state
treasurer and the school district shall enter into amended and
restated repayment agreements to incorporate the levy and repayment
requirements applicable to qualified loans issued before July 20,
2005.
(7) Upon the request of a school district made before June 1
of any year, the state treasurer annually may waive all or a
portion of the millage required to be levied by a school district
to pay principal and interest on its qualified bonds or qualified
loans under this section if the state treasurer finds all of the
following:
(a) The school board of the school district has applied to the
state treasurer for permission to levy less than the millage
required to be levied to pay the principal and interest on its
qualified bonds or qualified loans under subsection (1).
(b) The application specifies the number of mills the school
district requests permission to levy.
(c) The waiver will be financially beneficial to this state,
the school district, or both.
(d) The waiver will not reduce the millage levied by the
school district to pay principal and interest on qualified bonds or
qualified loans under this act to less than 7 mills.
(e) The board of the school district, by resolution, has
agreed to comply with all conditions that the state treasurer
considers necessary.
(8)
Except as otherwise provided in this act, All qualified
loans shall bear interest at 1 of the following rates:
(a) The greater of 3% or the average annual cost of funds
computed by the state treasurer not less often than annually on the
basis of 1 of the following:
(i) All notes or bonds issued by the Michigan municipal bond
authority to fund qualified loans or refinance those notes or bonds
plus 0.125%.
(ii) If no bonds or notes issued by the Michigan municipal bond
authority are outstanding, all bonds or notes issued by this state
under sections 15 and 16 of article IX of the state constitution of
1963 plus 0.125%.
(b) A lesser rate determined by the state treasurer to be
necessary to maintain the exemption from federal income tax of
interest
on any qualified loans bonds
or notes referred to in
subdivision (a)(i) or (ii).
(9) A payment date determined under subsection (2) or a due
date determined under subsection (3) is a final mandatory repayment
date. Once established for a school district as provided in this
section, a final mandatory repayment date shall apply to all
qualified loans of the school district, whenever made, until 30
days after the date the school district has no outstanding
qualified bonds or qualified loans and no outstanding debt incurred
to refund qualified bonds or qualified loans. Notwithstanding this
subsection, the state treasurer may determine a later mandatory
repayment date for a school district that agrees to levy a higher
millage, acceptable to the state treasurer (not to exceed 13
mills), than its existing computed millage.
Sec.
11. The state treasurer shall may promulgate
rules to
implement this act pursuant to the administrative procedures act of
1969, 1969 PA 306, MCL 24.201 to 24.328, and may issue bulletins as
authorized by this act.
Sec. 13. (1) If a school district owes a balance due to the
revolving loan fund or has been identified as a potential borrower,
the school district shall file an annual loan activity application
with the state treasurer no less than 60 days before certifying its
annual tax levy. The annual loan activity application shall be
submitted in a format prescribed by the state treasurer and shall
provide the taxable value, debt service, and any other information
necessary to determine the proper required millage levy required
under this act. The application shall contain a resolution passed
by the local school board authorizing a designated school district
official to complete all necessary documents to obtain a loan from
the revolving loan fund or for making repayment to the revolving
loan fund for the year.
(2) If a school district is eligible to borrow for debt
service on qualified bonds, the school district shall file a draw
request with the state treasurer not less than 30 days before each
date on which the school district owes the debt service. The draw
request shall include all of the following:
(a) A statement of the debt service owed in the next 6 months.
(b) A copy of the most recent bank statement showing the
amount on hand in the debt service accounts for all qualified
bonds.
(c) A statement of any revenue received for payment of the
debt service since the date of the bank statement.
(d) A statement of any withdrawals made from the debt service
account since the date of the bank statement.
(3) Not more than 7 days before the date established by the
state treasurer for making qualified loans, the school district
shall confirm in writing the final qualified loan amount to be
drawn on a certificate in the form prescribed by the state
treasurer.
(4) Upon receipt of a qualified loan confirmation described in
subsection (3), the state treasurer shall determine the amount of
the draw, which shall be the difference between the funds on hand
in all debt service accounts and the amount of the debt service,
and shall make a qualified loan in that amount to the school
district no later than 6 days before the date the debt service is
due.
(5) When a school district's computed millage is sufficient to
pay principal and interest on its qualified bonds, a school
district
shall file a loan activity statement with the state
treasurer
no later than 30 days before the date set for payment of
the
qualified bonds setting forth all of the following: notify the
state treasurer in writing of no need to borrow no later than 30
days before the date set for payment of the qualified bonds.
(a)
A statement of the debt service owed in the next 6 months.
(b)
A copy of the most recent bank statement showing the
amount
on hand in the debt service account for the qualified bonds.
(c)
A statement of any revenue received for payment of the
debt
service since the date of the bank statement.
(d)
A statement of any withdrawals made from the debt service
account
since the date of the bank statement.
(6)
Within 30 days after receipt of the loan annual activity
statement
application under subsection (5) (1),
the state treasurer
shall send an invoice to the school district for the amount of
repayment the school district owes on its outstanding qualified
loans, which shall be the difference between the debt service
payable or paid to bondholders and the funds on hand at the school
district, less a reasonable amount of funds on hand, as determined
by the state treasurer, to cover minimum balance requirements or
potential tax disputes. The school district shall remit the amount
specified in the invoice within 30 days after the dated date of the
invoice.
Sec. 16. (1) The state treasurer may charge a prequalification
application fee, a qualification application fee, and an annual
loan activity fee in the amounts determined by the state treasurer
to be required to pay the estimated administrative expenses
incurred under this act for the fiscal year in which the state
treasurer imposes the fee.
(2) The state treasurer shall deposit all fees collected under
this act into a separate fund established within the state
treasury, and shall use the proceeds of the fees solely for the
purpose of administering and enforcing this act. The unexpended and
unobligated balance of this fund at the end of each state fiscal
year shall be carried forward over to the succeeding state fiscal
year and shall not lapse to the general fund but shall be available
for reappropriation for the next state fiscal year.
Sec. 18. If a school district has completed the projects
approved by the school electors of the school district to be funded
from proceeds of qualified bonds, a school district may use any
remaining proceeds of the qualified bonds as follows:
(a)
To pay for enhancements to the projects approved by the
school
electors as described in the ballot proposing the qualified
bonds.
(a) (b)
To pay debt service on the
qualified bonds.
(b) (c)
To repay this state.
(c) If in the opinion of the school district's bond counsel
use of the remaining proceeds for the purposes described in
subdivisions (a) and (b) would adversely affect the federal tax
treatment of interest on the qualified bonds, to pay for
enhancements to the projects approved by the school electors as
described in the ballot language proposing the qualified bonds.