DEPARTMENT OF TREASURY
STATE TREASURER
SCHOOL BOND QUALIFICATION, APPROVAL, AND LOAN RULES
Filed with the secretary of state on These rules take effect immediately upon filing with the secretary of state unless adopted under section 33, 44, or 45a(6) of the administrative procedures act of 1969, 1969 PA 306, MCL 24.233, 24.244, or 24.245a. Rules adopted under these sections become effective 7 days after filing with the secretary of state.
(By authority conferred on the state
treasurer by section 11 of the school bond qualification, approval, and loan
act,
2005 PA 92, MCL 388.1931, and section 33 of the administrative procedures act of
1969, 1969
PA 306, MCL 24.233
24.201
to 24.328 all as amended)
R 388.2, R 388.3, R 388.11, R 388.12, and R 388.13 of the Michigan Administrative Code are amended, and R 388.6, R 388.10 and R 388.20 of the Code are rescinded, as follows:
R 388.2 Preliminary qualification; application.
Rule 2. (1) A completed preliminary qualification application shall include a submission to the department that complies with section 5 of the act, MCL 388.1925, any other applicable law, and any other guidance published by the department including, but not limited to, global instructions, policies, procedures, guidelines or rules. The application shall include the following:
(a) The proposed ballot language to be submitted to the electors shall include all language required by the following statutes:
(i)
Section 1361 of the revised
school code, 1976 PA 451, MCL
380.1361, the revised school code.
(ii)
Section 24f of the general
property tax act, 1893 PA 206, MCL
211.24f, general property tax act.
(iii) Section 8 of the act, MCL 388.1928.
(iv) Any other applicable law.
(b) A description of the project or projects to be financed including all of the following:
(i) A cost analysis providing summary totals that can be matched to budget estimates as reported by the school district.
(ii) For new construction, all of the following shall be included:
(A) The estimated number of rooms.
(B) The types of rooms expected to be constructed. (C)The estimated square footage of the project or projects.
(D) The estimated cost per square foot.
(iii) For remodeling and site work, all of the following shall be included:
(A) The planned use of the space.
(B) The type of work expected to be performed.
(C) The estimated total cost of the work to be performed.
(iv) For site acquisitions, the total cost of acquisition shall be included, or if such information is not available, the estimated total cost of acquisition.
(v) For technology, furnishings, and equipment, school districts shall provide detail regarding the types of technology, furnishings, and equipment to be purchased.
(c) A pro forma debt service projection, which shall demonstrate both of the following:
(i) That the projected computed millage will be sufficient to repay principal and interest on all of the school district's existing and proposed new qualified bonds plus principal and interest on all existing and anticipated qualified loans related to those bonds not later than the final mandatory repayment date.
(ii) That the school district's projected average growth in taxable value is based on the assumptions required by the act.
(d) The utilization rate for each project included in the preliminary qualification application, which meets the following specifications:
(i) The utilization rate shall be calculated by dividing the projected 5-year enrollment by the standard pupil capacity factor provided by the department.
(ii) The 5-year enrollment projection used in this calculation shall be obtained from an enrollment projection service provider approved by the department.
(iii)
When the utilization rate
for any building is below 60% for remodeling projects and 85% for new
construction projects, the school district shall submit a written explanation
of such variance discussing the actions the school district intends to take to
address the underutilization.
(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)
An amortization schedule in
accordance with sections 5(2)(k) and 7(1)(d) of the act, MCL 388.1925(2)(k)
and MCL 388.1927(1)(d).
(g) A completed prequalification application includes the
following data, which the department shall use for informational purposes only:
(i) The total bonded debt outstanding of the school
district for the school district fiscal year in which the application is filed.
(ii) The total taxable value of property in the school
district for the school district fiscal year in which the application is filed.
(iii)
A statement describing any
environmental or usability problems to be addressed by the project or projects.
(iv)
An architect's analysis of
the overall condition of the facilities to be renovated or replaced as a part
of the project or projects.
(v)
Acknowledgement that the
district will keep books and records of expenditure of bond proceeds and make
this information available to the department upon request within 5 business
days.
(2) The department shall determine the reasonableness of cost per square foot by comparing the cost included in the preliminary qualification application to the cost per square foot parameter announced annually by the department. The cost per square foot parameter announced annually by the department shall be calculated from data derived from reputable independent sources, including but not limited to, R.S. Means or such similar entity that provides reliable objective information.
(3) If it has been more than 12 months since the
preliminary qualification was approved, then a school district shall submit the
following information to update the application prior to submitting an
application for final qualification:
(a) A status report of any previous series of bonds
included in the authorization.
(b)
Updated project sheets for
each project included in the proposed series and supporting cost detail, as
described in R 388.2(1)(b).
(c)
A cost summary sheet for proposed
bond series.
(d) An updated pro forma debt service projection showing
bond structure for proposed series.
Rule 3. (1) To obtain final qualification of bonds, a school district shall, along with meeting any other requirements of section 7 of the act, MCL 388.1927, submit a final qualification application and supporting documentation in the form prescribed by the department.
(2) Supporting documentation shall include all of the following:
(a) A cover letter from legal counsel indicating the requested approval date and delivery date if known at the time of submission.
(b) The certificate of determination of election results and vote count approving the bonds.
(c) An updated pro forma debt service projection.
(d) A copy of any adopted resolution authorizing the issuance of bonds.
(e) A copy of any resolution authorizing the sale of bonds if such a resolution is applicable.
(f)
The preliminary or final
official statement, whichever is available at the time of submission.
(g)
Acknowledgement that the
district will keep books and records of expenditure of bond proceeds and make
this information available to the department upon request within 5 business
days.
(3)
Supporting documentation for
refunding bond issues shall include additional financial schedules that
document net present value savings of the refunding bond issue. both of
the following:
(a) Additional financial schedules that document net
present value savings of the refunding bond issue.
(b) A draft verification report of mathematical accuracy
of the refunding tables, prepared by a reliable independent source.
(4)
If a school district does
not issue its qualified bonds within 180 days after the date of the order
qualifying bonds, then the school district shall submit a revised application
and updated pro forma debt service projection to the department.
(5)
(4) Notwithstanding the repayment requirements of these
rules, all bonds qualified under the act and Article IX of the state
constitution of 1963 shall be considered qualified upon issuance of the order
qualifying bonds by the state treasurer until final maturity.
R
388.6 Certification of computed millage.
Rescinded.
Rule 6.
Subject to the act and other provisions of these rules, a school district shall
authorize, agree to, and certify the levy of its full computed millage before
borrowing from the school loan revolving fund.
Rule 10. The final mandatory
repayment dates for borrowing related to qualified bond issues shall be
determined in accordance with the act.
Rule 11. (1) All qualified loans shall bear interest as defined in section 9(8) of the act, MCL 388.1929.
(2) The department shall recalculate the interest rate on all qualified loans at least quarterly. if any of the following occur:
(a)
Additional school loan
bonds or school loan revolving fund bonds are
issued.
(b)
Existing school loan bonds
or school loan revolving fund bonds are refunded.
(c) Principal payments are made on existing school loan
bonds or school loan revolving fund
bonds.
(d) Each time variable interest rates are adjusted on
school loan bonds, or quarterly for school loan revolving fund bonds.
(3) Interest on all qualified loans shall be compounded annually on September 30.
Rule 12. (1)
If the revenue generated by a school district's computed millage levied in a
12-month period exceeds the debt service due on qualified bonds during that 12-
month period, then the school district shall pay the difference, less a
reasonable amount of funds on hand, as determined by the state treasurer, to
cover minimum balance requirements or potential tax disputes, to the department
as payment of the outstanding loan.
(2) (1) The department shall issue an invoice to
the school district at least once a year when the information contained in a
loan activity statement demonstrates that the revenue generated by a school
district's levy of the computed millage will exceed the annual debt service on
the bonds.
(3)
(2) The school district shall remit the amount specified
in the invoice to the department not later than the next succeeding May 15
after the dated date of the invoice.
(4)
(3) The school district shall promptly submit to the
department an explanation of any difference between the invoiced payment due
and the payment remitted.
R 388.13 Noncompliance; remedies.
Rule 13. (1) The following situations constitute noncompliance:
(a) A school district that owes the state loan repayments relating to qualified bonds fails to levy at least the computed millage upon its taxable value for debt retirement purposes for qualified bonds or qualified loans under the act.
(b) A school district fails to honor its agreement to repay a qualified loan or any installment of a qualified loan.
(c) A school district fails to file or correctly file required documentation as defined in the act or these rules.
(2) In addition to any other remedies provided by the act
or other state law, in the event of noncompliance, the school district shall file
or correct the required documentation. do all of the following as
required by the department:
(a)
File or correct the
required documentation.
(b)
Increase its debt levy in
the next succeeding year to obtain the funds necessary to repay the amount of
the default plus a late charge that shall be 3% of the amount due. If a school
district fails to levy at least the computed millage upon its taxable value,
then the school district shall increase its debt levy in the next succeeding
year to obtain the amount necessary to repay the amount of the default plus a
late charge that shall be 3% of the amount due even when such an increase will
be higher than the computed millage.
(c)
Shall pay to the state the
amount of the default plus the 3% late charge together with any other amounts
owed during the next tax year following the year in which the default occurred.
(3)
The department shall cause
state school aid not to be disbursed to the non- complying school district
until arrangements for the payment of the amount in arrears are made with the
department's approval.
(4) (3) Failure
of a school district to comply with application due dates or failure of a
school district to process any report, application, confirmation, or repayment
as required under the act or in these rules may result in 1 or both of the following:
(a) The department may issue a notification to the school board requiring a written response of remedy.
(b) The department may withhold a school district's state aid funds until the school district complies with all requirements.
(5)
(4) None of the following situations constitutes noncompliance:
(a) Taxpayer delinquencies.
(b) Failure of projected pupil or tax base growth rates to meet initial projections.
(c) Decline in the school district tax base.
.
R 388.20 Use of remaining proceeds. Rescinded.
Rule 20.
(1) School districts may only use bond proceeds remaining after the approved
projects are completed to do the following:
(a)
Pay debt service on
qualified bonds.
(b)
Pay qualified loans.
(2) Only
under limited circumstances, and if in the opinion of the district’s bond
counsel, the use of remaining proceeds to pay down debt would adversely affect
the tax treatment of interest on the qualified bonds, the district may use
remaining bond proceeds to pay for enhancements to the projects approved by the
school electors as described in the ballot language.