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S1053......................................................by STATE AFFAIRS
SCHOOL DISTRICT BONDS - Amends existing law to provide that the amount of
debt guaranteed by the Credit Enhancement Program shall not be greater than
four times the amount made available by the Public School Permanent
Endowment Fund; to provide a maximum amount of school bonds that may be
guaranteed; to provide an exception; and to provide the maximum amount of
school district bonds that may be guaranteed when school districts
consolidate.
01/26 Senate intro - 1st rdg - to printing
01/29 Rpt prt - to St Aff
02/26 Rpt out - rec d/p - to 2nd rdg
02/27 2nd rdg - to 3rd rdg
03/01 3rd rdg - PASSED - 34-0-1
AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
Cameron, Corder, Darrington, Davis, Fulcher, Gannon, Geddes, Goedde,
Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst, Little,
Lodge, Malepeai, McGee, McKague, McKenzie, Pearce, Richardson,
Schroeder, Siddoway, Stegner, Stennett, Werk
NAYS -- None
Absent and excused -- Coiner
Floor Sponsor - Little
Title apvd - to House
03/02 House intro - 1st rdg - to Educ
03/06 Rpt out - rec d/p - to 2nd rdg
03/07 2nd rdg - to 3rd rdg
03/12 3rd rdg - PASSED - 67-0-3
AYES -- Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Black, Block,
Bock, Boe, Bolz, Brackett, Bradford, Chadderdon, Chavez, Chew,
Collins, Crane, Durst, Edmunson, Eskridge, Hagedorn, Hart, Harwood,
Henbest, Jaquet, Killen, King, Kren, Labrador, Lake, LeFavour,
Loertscher, Luker, Marriott, Mathews, McGeachin, Mortimer, Moyle,
Nielsen, Nonini, Pasley-Stuart, Patrick, Pence, Raybould, Ring,
Ringo, Roberts, Ruchti, Rusche, Sayler, Schaefer, Shepherd(2),
Shepherd(8), Shirley, Shively, Smith(30), Smith(24), Snodgrass,
Stevenson, Thayn, Trail, Vander Woude, Wills, Wood(27), Wood(35), Mr.
Speaker
NAYS -- None
Absent and excused -- Anderson, Clark, Henderson
Floor Sponsor - Nielsen
Title apvd - to Senate
03/13 To enrol
03/14 Rpt enrol - Pres signed - Sp signed
03/15 To Governor
03/20 Governor signed
Session Law Chapter 89
Effective: 07/01/07
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature First Regular Session - 2007
IN THE SENATE
SENATE BILL NO. 1053
BY STATE AFFAIRS COMMITTEE
1 AN ACT
2 RELATING TO CREDIT GUARANTEES FOR SCHOOL DISTRICTS; AMENDING SECTION 57-728,
3 IDAHO CODE, TO PROVIDE THAT THE AMOUNT OF DEBT GUARANTEED BY THE CREDIT
4 ENHANCEMENT PROGRAM SHALL NOT BE GREATER THAN FOUR TIMES THE AMOUNT MADE
5 AVAILABLE BY THE PUBLIC SCHOOL PERMANENT ENDOWMENT FUND; AND AMENDING SEC-
6 TION 33-5303, IDAHO CODE, TO PROVIDE A MAXIMUM AMOUNT OF SCHOOL DISTRICT
7 BONDS THAT MAY BE GUARANTEED, TO PROVIDE AN EXCEPTION, TO PROVIDE THE MAX-
8 IMUM AMOUNT OF SCHOOL DISTRICT BONDS THAT MAY BE GUARANTEED WHEN SCHOOL
9 DISTRICTS CONSOLIDATE AND TO MAKE TECHNICAL CORRECTIONS.
10 Be It Enacted by the Legislature of the State of Idaho:
11 SECTION 1. That Section 57-728, Idaho Code, be, and the same is hereby
12 amended to read as follows:
13 57-728. CREDIT ENHANCEMENT PROGRAM FOR SCHOOL DISTRICT BONDS. (1) The
14 endowment fund investment board shall administer a school district bond credit
15 enhancement program in accordance with this section and in conjunction with
16 chapter 53, title 33, Idaho Code, and may promulgate rules to implement it.
17 This program applies to voter approved bonds issued by school districts. The
18 program is intended to benefit school districts by purchasing notes issued by
19 the state of Idaho, whereby the state may guarantee payment of school district
20 bonded indebtedness in order to avoid an imminent default, providing lower
21 interest rates at which the bonds may be issued.
22 (2) A school district that seeks the guarantee of bonds under this pro-
23 gram shall apply to the state treasurer pursuant to section 33-5304, Idaho
24 Code. The state treasurer shall transmit all approved applications to the
25 board. The board may challenge an approved application within three (3) busi-
26 ness days of their receipt of the same. If no challenge is issued within three
27 (3) business days the application shall be deemed approved by the board. In
28 the event of a challenge in writing to the state treasurer, the treasurer and
29 the board shall have ten (10) business days to mutually approve the applica-
30 tion. If after a challenge by the board, the application is not mutually
31 approved within the ten (10) business days, the application shall be deemed
32 rejected. Nothing contained herein shall prohibit a school district from
33 reapplying following a rejected application.
34 (3) Upon approval of the credit enhancement program under this section,
35 the following shall be in effect in the event moneys from the sales tax
36 account or from the provisions of section 33-5309, Idaho Code, are insuffi-
37 cient to pay the principal of and interest on the notes issued by the state
38 pursuant to section 33-5308, Idaho Code, the endowment fund shall purchase new
39 notes from the state, in accordance with section 33-5308, Idaho Code, the pro-
40 ceeds of which shall be sufficient to pay the principal of and the interest on
41 the original notes as they become due pursuant to section 33-5308, Idaho Code.
42 The new notes shall be subject to the following terms and conditions:
43 (a) The notes shall bear interest at a rate equal to an annual rate ten
2
1 percent (10%) higher than the average interest earned on the investments
2 of the public school permanent endowment fund in the four (4) calendar
3 quarters preceding the quarter in which the loan occurred and if this fig-
4 ure is not equal to the percentage return of the fund's highest category
5 of investments in its portfolio, then the interest rate shall equal that
6 percentage return on investment, plus all additional administrative costs
7 related to these investments;
8 (b) The notes, including principal and interest, shall be repaid from the
9 district's next payments pursuant to chapter 8, title 33, Idaho Code, as
10 collected by the state treasurer;
11 (c) The state may make additional payments on the note;
12 (d) The endowment fund investment board may require the state treasurer
13 to compel the school district to modify its fiscal practices and its gen-
14 eral operations if the board determines that there is a substantial like-
15 lihood that the district will not be able to make future payments required
16 under this section.
17 (4) The provisions of this section shall not be deemed to interfere with
18 the state treasurer's ability in chapter 53, title 33, Idaho Code, to obtain
19 repayment of a delinquent obligation.
20 (5) For purposes of administering the provisions of this section, the
21 board shall make available the sum of at least two hundred million dollars
22 ($200,000,000) from the public school permanent endowment fund, for purposes
23 of purchasing notes as authorized by this section. The amount of debt guaran-
24 teed by the credit enhancement program shall not be greater than three four
25 (34) times the amount made available by the public school permanent endowment
26 fund.
27 SECTION 2. That Section 33-5303, Idaho Code, be, and the same is hereby
28 amended to read as follows:
29 33-5303. STATE'S GUARANTEE -- MONITORING OF FINANCIAL SOLVENCY CONTRACT
30 WITH BONDHOLDERS -- GUARANTEE -- LIMITATION AS TO CERTAIN REFUNDED BONDS.
31 (1) (a) The state of Idaho pledges to and agrees with the holders of any
32 bonds that the state will not alter, impair, or limit the rights vested by
33 the default avoidance program with respect to the bonds until the bonds,
34 together with applicable interest, are fully paid and discharged.
35 (b) Notwithstanding subsection (1)(a) of this section, nothing contained
36 in this chapter precludes an alteration, impairment, or limitation if ade-
37 quate provision is made by law for the protection of the holders of the
38 bonds.
39 (c) Each school district may refer to this pledge and undertaking by the
40 state in its bonds.
41 (2) (a) The sales tax of the state is pledged to guarantee full and
42 timely payment of the principal of, (either at the stated maturity or by
43 any advancement of maturity pursuant to a mandatory sinking fund payment),
44 and interest on, refunding bonds issued on and after March 1, 1999, for
45 voter approved bonds which were voted on by the electorate prior to March
46 1, 1999, and voter approved bonds which were voted on by the electorate on
47 and after March 1, 1999, as such payments shall become due, (except that
48 in the event of any acceleration of the due date of such principal by rea-
49 son of mandatory or optional redemption or acceleration resulting from
50 default or otherwise, other than any advancement of maturity pursuant to a
51 mandatory sinking fund payment, the payments guaranteed shall be made in
52 such amounts and at such times as such payments of principal would have
53 been due had there not been any such acceleration).
3
1 (b) This guaranty does not extend to the payment of any redemption pre-
2 mium.
3 (c) Reference to this chapter by its title on the face of any bond con-
4 clusively establishes the guaranty provided to that bond under provisions
5 of this chapter.
6 (3) (a) Any bond guaranteed under this chapter that is refunded and con-
7 sidered paid for, no longer has the benefit of the guaranty provided by
8 this chapter from and after the date on which that bond was considered to
9 be paid.
10 (b) Any refunding bond issued by a board that is itself secured by gov-
11 ernment obligations until the proceeds are applied to pay refunded bonds
12 is not guaranteed under the provisions of this chapter, until the refund-
13 ing bonds cease to be secured by government obligations.
14 (4) Only validly issued bonds issued after the effective date of this
15 chapter are guaranteed under this chapter.
16 (5) On and after July 1, 2007, state school bond guarantees issued by the
17 state of Idaho shall not exceed twenty million dollars ($20,000,000) in the
18 aggregate per school district. Notwithstanding this maximum limit, bond guar-
19 antees exceeding the twenty million dollar ($20,000,000) limit prior to July
20 1, 2007, shall remain in effect. In the event school districts consolidate,
21 the maximum state bond guarantee of the newly consolidated school district
22 shall be the sum of the maximum limit of each school district participating in
23 the consolidation. This new maximum limit shall also apply to bonds issued by
24 the consolidated district after July 1, 2007.
STATEMENT OF PURPOSE
RS 16575C1
This legislation raises the cap for the School Bond Guarantee
Program when school districts in Idaho access the state's AAA
guarantee for voter approved school district bonds. The current
cap is three (3) times the amount of the $200 million dollar cash
pledge made available by the Public School Permanent Endowment
Fund. Currently the guarantee capacity is $600 million dollars,
which is totally maxed out - prohibiting any further use of the
state's AAA rating by school districts. This bill will raise the
cap to four (4) times the Public School Permanent Endowment Fund
cash pledge of $200 million dollars (the cap will move from $600
million to $800 million). The rating agencies are comfortable with
this move.
Further, it limits the amount that any one school district can
access by setting a maximum amount of $20 million dollars per
school district, thereby allowing more school districts to
participate in the program.
Finally, if two school districts choose to consolidate they will be
allowed to carry forward the aggregate amount ($40 million dollar
capacity) to the newly formed joint district. This new maximum
limit will apply only to bonds issued after July 1, 2007.
FISCAL NOTE
No Fiscal Impact.
(Note - interest rates on issued bonds under this program will be
lower than if the bonds are issued without the guarantee, thereby
saving money for property tax payers who service school district
bonded indebtedness.)
Contact
Name: Ron Crane, State Treasurer's Office
Phone: 334-3200
STATEMENT OF PURPOSE/FISCAL NOTE S 1053