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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 threefour 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