HF 2981

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to education finance; authorizing an intermediate school district to
borrow in anticipation of revenue payments; amending Minnesota Statutes 2006,
sections 126C.51; 126C.52, subdivision 2, by adding a subdivision; 126C.53;
126C.55.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2006, section 126C.51, is amended to read:

126C.51 APPLICATION OF LIMITING TAX LEGISLATION.

Notwithstanding the provisions of section 471.69 or 471.75, or of any other
provision of law which by per capita limitation, local tax rate limitation, or otherwise,
limits the power of a district to incur any debt or to issue any warrant or order, a new text begin school
new text end district new text begin or intermediate school district new text end has the powers in sections 126C.50 to 126C.56
specifically conferred upon it and all powers incident and necessary to carrying out the
purposes of sections 126C.50 to 126C.56.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2006, section 126C.52, subdivision 2, is amended to read:

Subd. 2.

Limitations.

The board new text begin of any school district new text end may also borrow money
in the manner and subject to the limitations set forth in sections 126C.50 to 126C.56 in
anticipation of receipt of state aids for schools as defined in Minnesota Statutes and of
federal school aids to be distributed by or through the department. The aggregate of such
borrowings under this subdivision shall never exceed 75 percent of such aids which are
receivable by said school district in the deleted text begin school deleted text end new text begin fiscal new text end year deleted text begin (from July 1 to June 30) deleted text end in which
the money is borrowed, as estimated and certified by the commissioner.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2006, section 126C.52, is amended by adding a subdivision
to read:

new text begin Subd. 3. new text end

new text begin Intermediate school districts. new text end

new text begin (a) The board of an intermediate school
district may borrow money in the manner and subject to the limitations set forth in
sections 126C.50 to 126C.56 in anticipation of the receipt of:
new text end

new text begin (1) state aids for schools as defined in Minnesota Statutes;
new text end

new text begin (2) federal school aids to be distributed by or through the department; and
new text end

new text begin (3) membership fees and tuition payments from its member school districts.
new text end

new text begin The aggregate of such borrowings under this subdivision shall never exceed 75
percent of such aids, fees, and tuition payments which are receivable by the intermediate
school district in the fiscal year in which the money is borrowed, as estimated and certified
by the commissioner.
new text end

new text begin (b) The board of an intermediate school district may amend its bylaws upon receipt of
a written resolution by each of its member school districts to pledge the member district's
full faith and credit and unlimited taxing powers to repay the amount paid by the state
under section 126C.55, subdivision 2, plus interest, if the revenues specified in paragraph
(a) and any other revenues of the intermediate school district are insufficient to do so.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2006, section 126C.53, is amended to read:

126C.53 ENABLING RESOLUTION; FORM OF CERTIFICATES OF
INDEBTEDNESS.

The board new text begin of a school district or intermediate school district new text end may authorize and
effect such borrowing, and may issue such certificates of indebtedness upon passage of
a resolution specifying the amount and purposes for which it deems such borrowing is
necessary. The resolution must be adopted by a vote of at least two-thirds of its members.
The board must fix the amount, date, maturity, form, denomination, and other details of
the certificates of indebtedness, not inconsistent with this chapter. The board must fix the
date and place for receipt of bids for the purchase of the certificates when bids are required
and direct the clerk to give notice of the date and place for bidding.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2006, section 126C.55, is amended to read:

126C.55 STATE PAYMENT OF DEBT OBLIGATION UPON POTENTIAL
DEFAULT; REPAYMENT; STATE OBLIGATION NOT DEBT.

Subdivision 1.

Definitions.

For the purposes of this section, the term "debt
obligation" means:

(1) a tax or aid anticipation certificate of indebtedness;

(2) a certificate of participation issued under section 126C.40, subdivision 6; or

(3) a general obligation bond.

Subd. 2.

Notifications; payment; appropriation.

(a) If a new text begin school new text end district new text begin or
intermediate school district new text end believes that it may be unable to make a principal or interest
payment on any outstanding debt obligation on the date that payment is due, it must
notify the commissioner as soon as possible, but not less than 15 working days before the
date that principal or interest payment is due. The notice must include the name of the
district, an identification of the debt obligation issue in question, the date the payment is
due, the amount of principal and interest due on the payment date, the amount of principal
or interest that the district will be unable to repay on that date, the paying agent for the
debt obligation, the wire transfer instructions to transfer funds to that paying agent, and an
indication as to whether a payment is being requested by the district under this section.
If a paying agent becomes aware of a potential default, it shall inform the commissioner
of that fact. After receipt of a notice which requests a payment under this section, after
consultation with the district and the paying agent, and after verification of the accuracy of
the information provided, the commissioner shall notify the commissioner of finance of
the potential default. The notice must include a final figure as to the amount due that the
district will be unable to repay on the date due.

(b) Except as provided in subdivision 9, upon receipt of this notice from the
commissioner, the commissioner of finance shall issue a warrant and authorize the
commissioner of education to pay to the paying agent for the debt obligation the specified
amount on or before the date due. The amounts needed for the purposes of this subdivision
are annually appropriated to the department from the state general fund.

(c) The Departments of Education and Finance must jointly develop detailed
procedures for new text begin school new text end districts new text begin and intermediate school districts new text end to notify the state that they
have obligated themselves to be bound by the provisions of this section, procedures for
districts and paying agents to notify the state of potential defaults and to request state
payment under this section, and procedures for the state to expedite payments to prevent
defaults. The procedures are not subject to chapter 14.

Subd. 3.

School district bound; interest rate on state paid amount.

If, at the
request of a new text begin school new text end district new text begin or intermediate school district new text end , the state has paid part or all of
the principal or interest due on a district's debt obligation on a specific date, the district is
bound by all provisions of this section and the amount paid shall bear taxable interest from
the date paid until the date of repayment at the invested cash rate as it is certified by the
commissioner of finance. Interest shall only accrue on the amounts paid and outstanding
less the reduction in aid under subdivision 4 and other payments received from the district.

Subd. 4.

Pledge of district's full faith and credit.

If, at the request of a new text begin school
new text end district new text begin or intermediate school district new text end , the state has paid part or all of the principal or
interest due on a district's debt obligation on a specific date, the pledge of the full faith and
credit and unlimited taxing powers of the district to repay the principal and interest due
on those debt obligations shall also, without an election or the requirement of a further
authorization, become a pledge of the full faith and credit and unlimited taxing powers of
the district to repay to the state the amount paid, with interest. Amounts paid by the state
must be repaid in the order in which the state payments were made.

new text begin Subd. 4a. new text end

new text begin Aid reduction for repayment. new text end

new text begin (a) Except as provided in this subdivision,
the state must reduce the state aid payable to the school district or intermediate school
district under this chapter and chapters 122A, 123A, 123B, 124D, 125A, 126C, and 273
by the amount paid by the state under this section on behalf of the district, plus the interest
due on it, and the amount reduced must revert from the appropriate account to the state
general fund. Payments from the school district endowment fund or any federal aid
payments shall not be reduced.
new text end

new text begin (b) For an intermediate school district, the state aid payable to the intermediate
school district must first be reduced, before any reduction to the state aids payable to the
member districts. If the state aid payable to the intermediate school district is not sufficient
to repay the state, state aid payable to member districts may be reduced proportionately
based on the ratio of each member district's adjusted net tax capacity to the total adjusted
net tax capacity of all member districts.
new text end

new text begin (c) If, after review of the financial situation of the school district or intermediate
school district, the commissioner advises the commissioner of finance that a total reduction
of aids would cause an undue hardship on or an undue disruption of the educational
program of the district, the commissioner, with the approval of the commissioner of
finance, may establish a different schedule for reduction of aids to repay the state. The
amount of aids to be reduced is decreased by any amounts repaid to the state by the district
from other revenue sources.
new text end

Subd. 6.

Tax levy for repayment.

(a) With the approval of the commissioner, a
district may levy in the year the state makes a payment under this section an amount up to
the amount necessary to provide funds for the repayment of the amount paid by the state
plus interest through the date of estimated repayment by the district. The proceeds of this
levy may be used only for this purpose unless they are in excess of the amount actually
due, in which case the excess shall be used to repay other state payments made under this
section or shall be deposited in the debt redemption fund of the school district. This levy
shall be an increase in the levy limits of the district for purposes of section 275.065,
subdivision 6. The amount of aids to be reduced to repay the state shall be decreased by
the amount levied. This levy by the district is not eligible for debt service equalization
under section 123B.53.

(b) If the state is not repaid in full for a payment made under this section by
November 30 of the calendar year following the year in which the state makes the
payment, the commissioner shall require the district to certify a property tax levy in an
amount up to the amount necessary to provide funds for repayment of the amount paid by
the state plus interest through the date of estimated repayment by the school district. To
prevent undue hardship, the commissioner may allow the district to certify the levy over a
five-year period. The proceeds of the levy may be used only for this purpose unless they
are in excess of the amount actually due, in which case the excess shall be used to repay
other state payments made under this section or shall be deposited in the debt redemption
fund of the district. This levy shall be an increase in the levy limits of the school district
for purposes of section 275.065, subdivision 6. If the commissioner orders the district
to levy, the amount of aids reduced to repay the state shall be decreased by the amount
levied. This levy by the district is not eligible for debt service equalization under section
123B.53 or any successor provision. A levy under this subdivision must be explained as a
specific increase at the meeting required under section 275.065, subdivision 6.

new text begin (c) For an intermediate district, a levy made by a member district under paragraph
(a) or (b) must be spread by the commissioner as a tax rate based on the total adjusted net
tax capacity of the member school districts. The proceeds of the levy must be remitted
by the member school district to the intermediate school district and must be used by
the intermediate district only to repay the state amounts owed. Any amount in excess
of the amount owed to the state must be repaid to the member school districts and the
commissioner shall adjust each member district's property tax levy in the next year.
new text end

Subd. 7.

Election as to mandatory application.

A new text begin school new text end district new text begin or intermediate
school district new text end may covenant and obligate itself, prior to the issuance of an issue of debt
obligations, to notify the commissioner of a potential default and to use the provisions of
this section to guarantee payment of the principal and interest on those debt obligations
when due. If the district obligates itself to be bound by this section, it must covenant in the
resolution that authorizes the issuance of the debt obligations to deposit with the paying
agent three business days prior to the date on which a payment is due an amount sufficient
to make that payment or to notify the commissioner under subdivision 1 that it will be
unable to make all or a portion of that payment. A district that has obligated itself must
include a provision in its agreement with the paying agent for that issue that requires
the paying agent to inform the commissioner if it becomes aware of a potential default
in the payment of principal or interest on that issue or if, on the day two business days
prior to the date a payment is due on that issue, there are insufficient funds to make the
payment on deposit with the paying agent. Funds invested in a refunding escrow account
established under section 475.67 that are to become available to the paying agent on a
principal or interest payment date are deemed to be on deposit with the paying agent three
business days before the payment date. If a district either covenants to be bound by this
section or accepts state payments under this section to prevent a default of a particular
issue of debt obligations, the provisions of this section shall be binding as to that issue
as long as any debt obligation of that issue remain outstanding. If the provisions of this
section are or become binding for more than one issue of debt obligations and a district is
unable to make payments on one or more of those issues, the district must continue to
make payments on the remaining issues.

Subd. 8.

Mandatory plan; technical assistance.

If the state makes payments on
behalf of a new text begin school new text end district new text begin or intermediate school district new text end under this section or the district
defaults in the payment of principal or interest on an outstanding debt obligation, it must
submit a plan to the commissioner for approval specifying the measures it intends to
implement to resolve the issues which led to its inability to make the payment and to
prevent further defaults. The department must provide technical assistance to the district
in preparing its plan. If the commissioner determines that a district's plan is not adequate,
the commissioner shall notify the district that the plan has been disapproved, the reasons
for the disapproval, and that the state shall not make future payments under this section for
debt obligations issued after the date specified in that notice until its plan is approved. The
commissioner may also notify the district that until its plan is approved, other aids due the
district will be withheld after a date specified in the notice.

Subd. 9.

State bond rating.

If the commissioner of finance determines that the
credit rating of the state would be adversely affected thereby, the commissioner of finance
shall not issue warrants under subdivision 2 for the payment of principal or interest on any
debt obligations for which a district did not, prior to their issuance, obligate itself to be
bound by the provisions of this section.

Subd. 10.

Continuing disclosure agreements.

The commissioner of finance
may enter into written agreements or contracts relating to the continuing disclosure of
information needed to facilitate the ability of school districts to issue debt obligations
according to federal securities laws, rules, and regulations, including securities and
exchange commission rules and regulations, section 240.15c2-12. Such agreements or
contracts may be in any form the commissioner of finance deems reasonable and in the
state's best interests.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end