19 TAC §61.1032
The Texas Education Agency (TEA) proposes an amendment to §61.1032,
concerning administration of the instructional facilities allotment (IFA)
program. The section specifies provisions relating to definitions, the application
process, district and debt eligibility, the payment process, deadlines, and
prioritization and notice of award.
The proposed amendment to 19 TAC §61.1032 includes revisions to applicable
definitions and administrative procedures pertaining to the IFA program's
application, prioritization, and funding process in order to conform to changes
to the Texas Education Code (TEC), Chapter 46, Subchapter A, amended by Senate
Bill (SB) 4, 76th Texas Legislature, 1999. The amendment also adds content
and modifies existing language related to the prioritization criteria and
treatment of taxes brought about by the addition of TEC, Chapter 41, Subchapter
B, Existing Debt Allotment, enacted by SB 4. The proposed amendment will affect
all award decisions made after the effective date of the rule. The changes
do not effect decisions made prior to the effective date of the rule.
Specific revisions to §61.1032 include the following. Debt eligibility
language has been clarified in subsections (d)(2) for bonds and (d)(3) for
lease-purchase agreements, and language has been changed in subsection (e)
and new subsections (j)(1) and (l)(4) for consistency. Language regarding
additional applications has been removed from subsection (e) to form a new
subsection (f) to add emphasis and to be more clear and easier to read. Content
in new subsection (h)(4) and (5) has been added to incorporate prioritization
data sources from SB 4. Changes in new subsection (l) revise and add language
concerning application deadlines. Language regarding prioritization and notice
of award has been amended and moved to new subsection (m) to incorporate prioritization
criteria from SB 4. Content in new subsection (q) has been amended to clarify
changes in the treatment of taxes due to the enactment of TEC, Chapter 46,
Subchapter B.
Joe Wisnoski, managing director for school finance and fiscal analysis,
has determined that for the first five-year period the section is in effect
there will be no fiscal implications for state or local government as a result
of enforcing or administering the section.
Mr. Wisnoski and Criss Cloudt, associate commissioner for policy planning
and research, have determined that for each year of the first five years the
section is in effect the public benefit anticipated as a result of enforcing
the section will be to reduce confusion caused by language that inadequately
described program requirements and to streamline the administration of the
program in situations in which no funds are available for awards. There will
not be an effect on small businesses. There is no anticipated economic cost
to persons who are required to comply with the section as proposed.
Comments on the proposal may be submitted to Criss Cloudt, Policy Planning
and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701.
Comments may also be submitted electronically to
rules@tmail.tea.state.tx.us
or faxed to (512) 475-3499. All requests
for a public hearing on the proposed section submitted under the Administrative
Procedure Act must be received by the commissioner of education not more than
15 calendar days after notice of a proposed change in the section has been
published in the
Texas Register
.
The amendment is proposed under the Texas Education Code, §46.002,
as amended by Senate Bill 4, 76th Texas Legislature, 1999, which authorizes
the commissioner of education to adopt rules for the administration of the
Instructional Facilities Allotment.
The amendment implements the Texas Education Code, §46.002.
§61.1032.Instructional Facilities Allotment.
(a)
Definitions. The following definitions apply to the instructional
facilities allotment governed by this section:
(1)
Instructional facility--real property, an improvement to
real property, or a necessary fixture of an improvement to real property that
is used predominantly for teaching the curriculum required by Texas Education
Code (TEC), §28.002.
(2)
Noninstructional facility--a facility that may occasionally
be used for instruction, but the predominant use is for purposes other than
teaching the curriculum required by TEC, §28.002.
(3)
Necessary fixture--equipment necessary to the use of a
facility for its intended purposes, but which is permanently attached to the
facility such as lighting and plumbing.
(4)
Debt service--as used in this section, debt service shall
include payments of principal and interest on bonded debt or the amount of
a payment under an eligible lease-purchase arrangement.
(5)
Allotment--represents the amount of eligible debt service
that can be considered for state aid. The total allotment is comprised of
a combination of state aid and local funds. The state share and local share
are adjusted annually based on changes in average daily attendance, property
values, and debt service.
(b)
Application process. A school district must complete an
application requesting funding under the Instructional Facilities Allotment.
The commissioner may require supplemental information to be submitted at an
appropriate time after the application is filed to reflect changes in amounts
and conditions related to the debt. The application shall contain at a minimum
the following:
(1)
a description of the needs and projects to be funded with
the debt issue or other financing, with an estimate of cost of each project
and a categorization of projects according to instructional and noninstructional
facilities or other uses of funds;
(2)
a description of the debt issuance or other financing proposed
for funding, including a projected schedule of payments covering the life
of the debt;
(3)
an estimate of the weighted average maturity of bonded
debt; and
(4)
drafts of official statements or contracts that fully describe
the debt, as soon as available.
(c)
District eligibility. All school districts legally authorized
to enter into eligible debt arrangements as defined in subsection (d) of this
section are eligible to apply for an Instructional Facilities Allotment.
(d)
Debt eligibility. In order to be eligible for state funding
under this section, a debt service requirement must meet all of the criteria
of this subsection.
(1)
The debt service must be an obligation of the school district
which is entered into pursuant to the issuance of bonded debt under TEC, Chapter
45, Subchapter A; an obligation for refunding bonds as defined in TEC, §46.007;
or an obligation under a lease-purchase arrangement authorized by Local Government
Code, §271.004.
(2)
Application for funding of [
the
] bonded debt
service [
or lease-purchase payments
] must be made prior to the
passage of an order by the school district board of trustees authorizing the
bond issuance
[
pricing of the bonds or the passage of an order
by the school district board of trustees authorizing a lease-purchase arrangement
].
(3)
Application for funding of
lease-purchase payments must be made prior to the passage of an order by the
school district board of trustees authorizing the lease-purchase arrangement.
(4)
[
(3)
] Eligible bonded debt must
have a weighted average maturity of at least eight years. The term of a lease-purchase
agreement must be for at least eight years. For purposes of this section,
a weighted average maturity shall be calculated by dividing bond years by
the issue price, where "bond years" is defined as the product of the dollar
amount of bonds divided by 1,000 and the number of years from the dated date
to the stated maturity, and "issue price" is defined as the par value of the
issue plus accrued interest, less original issue discount or plus premium.
(5)
[
(4)
] Funds raised by the district
through the issuance of bonded debt must be used for an instructional facility
purpose as defined by TEC, §46.001. The facility acquired by entering
into a lease- purchase agreement must be an instructional facility as defined
by TEC, §46.001.
(6)
[
(5)
] If the bonded debt is for
a refunding or a combination of refunding and new debt, the refunding portion
must meet the same eligibility criteria with respect to dates of first debt
service as a new issue as defined by TEC, §46.003(d)(1).
(7)
[
(6)
] An amended application is
required for any eligible refunding bonds, regardless of whether a complete
or partial refunding is accomplished. Refunding bonds must also meet the following
three criteria as defined by TEC, §46.007:
(A)
Refunding bonds may not be called for redemption earlier
than the earliest call date of the bonds being refunded.
(B)
Refunding bonds must not have a maturity date later than
the final maturity date of the bonds being refunded.
(C)
The refunding of bonds must result in a present value savings,
which is determined by computing the net present value of the difference between
each scheduled payment on the original bonds and each scheduled payment on
the refunding bonds. Present value savings shall be computed at the true interest
cost of the refunding bonds.
(e)
Biennial limitation on access to allotment. The cumulative
amount of new debt service for which a district may receive approvals for
funding within a biennium shall be the greater of $100,000 per year or $250
per student in average daily attendance per year. A district may submit multiple
applications for approval during the same biennium. Timely application before
executing the bond order for
[
the pricing of
] bonds or authorizing
the
order for a lease-purchase
agreement
must be made to
ensure eligibility of the debt for program participation. The calculation
of the limitation on assistance shall be based on the highest annual amount
of debt service that occurs within the state fiscal biennium in which payment
of state assistance begins. [
Increases in debt service payment requirements
in subsequent biennia must receive approval through additional applications.
The limitation on the allotment for subsequent biennia shall be the total
dollar amount of debt service approved for the allotment, based on the calculation
of the limitation on assistance at the time of approval.
]
(f)
Additional applications. For
previously awarded debt, increases in debt service payment requirements in
subsequent biennia must receive approval through additional applications.
The portion of any increase in eligible, qualified debt service that may be
funded in subsequent biennia is the amount that exceeds any previously approved
amounts, subject to the biennial limitation on funding as calculated at the
time of approval of the additional application.
(g)
[
(f)
] Finality of award. Awards
of assistance under TEC, Chapter 46, will be made based on the information
available at the close of the application cycle. Changes in the terms of the
issuance of debt, either in the length of the payment schedule or the applicable
interest rate, that occur after the time of the award of assistance will not
result in an increase in the debt service considered for award. Any reduction
in debt service requirements resulting from changes in the terms of issuance
of debt shall result in a reduction in the amount of the award of assistance.
(h)
[
(g)
] Data sources.
(1)
For purposes of determining the limitation on assistance
and prioritization, the projected average daily attendance as submitted to
the legislature by the Texas Education Agency (TEA) in March of an odd-numbered
year, as required by TEC, §42.254, shall be used.
(2)
For purposes of prioritization, the final property values
certified by the Comptroller of Public Accounts for the tax year preceding
the year in which assistance is to begin shall be used. If final property
values are unavailable, the most recent projection of property values shall
be used.
(3)
For purposes of both the calculation of the limitation
on assistance and prioritization, the commissioner may consider, prior to
the close of an application cycle, adjustments to data values determined to
be erroneous.
(4)
For purposes of prioritization,
enrollment increases over the previous five years shall be determined using
Public Education Information Management System (PEIMS) submission data available
at the time of application.
(5)
For purposes of prioritization,
outstanding debt is considered voter-approved bonded debt or lease- purchase
debt outstanding at the time of the application deadline.
(6)
[
(4)
] All final calculations of
assistance earned shall be based on property values as certified by the Comptroller
for the preceding school year, and the final average daily attendance for
the current school year.
(i)
[
(h)
] Allocation of debt service
between qualified and nonqualified projects. Debt service shall be allocated
among qualified and nonqualified purposes and among eligible and ineligible
categories of debt. The method used for allocation among qualified and nonqualified
purposes shall be on the basis of pro rata value of the instructional facility
versus the noninstructional purposes over the life of the debt service, unless
a different basis is indicated in the bond order. The method of allocation
of debt service between eligible and ineligible categories must be the same
method selected for approval by the Attorney General.
(j)
[
(i)
] Payments and deposits.
(1)
Payment of state assistance shall be made as soon as practicable
after September 1 of each year. No payments shall be made until the
execution of the bond order
[
pricing of bonds
] is determined
to be final or the contract for lease-purchase financing has been assigned.
(2)
Funds received from the state for bonded debt must be deposited
to the interest and sinking fund of the school district and must be considered
in setting the tax rate necessary to service the debt.
(3)
Funds received from the state for lease-purchase agreements
must be deposited to the general fund of the district and used for lease-purchase
payments.
(4)
A final determination of state assistance for a school
year will be made using final attendance data and property value information
as may be affected by TEC, §42.257. Additional amounts owed to districts
shall be paid along with assistance in the subsequent school year, and any
reductions in payments shall be subtracted from payments in the subsequent
school year.
(5)
As an alternative method of adjustment of payments, the
commissioner may increase or decrease allocations of state aid under TEC,
Chapter 42, to reflect appropriate increases or decreases in assistance under
TEC, Chapter 46.
(k)
[
(j)
] Approval of Attorney General
required. All bond issues and all lease-purchase arrangements must receive
approval from the Attorney General before a deposit of state funds will be
made in the accounts of the school district.
(l)
[
(k)
] Deadlines.
(1)
The commissioner of education shall establish application
cycles based on the availability of appropriations for the purpose of awarding
new allotments. The commissioner may conduct more than one application cycle
to allocate funding appropriated for a fiscal year.
[
Two application
cycles will be conducted each year. Applications shall be received by 5:00
p.m., on June 15 and December 15 of each year, or the last official business
day that precedes these dates.
]
(2)
The commissioner shall announce the TEA's intention
to have an application cycle no less than 90 days prior to the application
deadline. The commissioner shall establish the relevant limit on the date
of first debt service payment from property taxes for eligible bonded debt
that will be considered for funding in the announced application cycle.
[
Based on availability of appropriations, the commissioner may cancel
application cycles. In the event of cancellation of an application cycle,
the commissioner shall provide for an interim application process to maintain
eligibility of school district debt for consideration for funding at a later
time. Applications received in this circumstance shall be considered in the
next cycle only if the provisions of subsection (k)(4) of this section are
met. Applications received in an interim in which no funds are available will
be reviewed along with any other applications received for the next cycle
for which funds are available. Interim applications receive no special consideration
other than the adjustment to property wealth as indicated in subsection (l)
of this section, if applicable.
]
(3)
An application received after the deadline shall be considered
a valid application for the subsequent period unless withdrawn by the submitting
district before the end of the subsequent period.
(4)
[
An application may be submitted no earlier than 180
calendar days prior to the prospective sale date/pricing date of the bond
issue or the date the school board adopts the order authorizing a lease-purchase
agreement.
] If the
execution of the bond order
[
pricing
of the bonds
] or the
authorizing
[
signing
] of
a lease-purchase agreement has not taken place
within 180 days of the
deadline for the current application cycle
[
by the end of the 180-day
period
], the TEA shall consider the application withdrawn. In the case
of a lease-purchase agreement, funding of the agreement, through the
execution of a bond order for
[
sale of
] revenue bonds or
other comparable financing transaction, must also be accomplished within the
180-day limit.
(5)
The school district may not submit an application for bonded
debt prior to the successful passage of an authorizing proposition.
The election to authorize the debt must be held prior to the close of the
application cycle.
An application for a lease-purchase agreement may
not be submitted prior to the end of the 60-day waiting period in which voters
may petition for a referendum, or until the results of the referendum, if
called, approve the agreement.
[
(l)
Prioritization and notice of award. Upon close
of the application cycle, all eligible applications shall be ranked in order
of property wealth per student in average daily attendance. State assistance
will be awarded beginning with the district with the lowest property wealth
and continue until all available funds have been utilized. If a district has
not previously received any assistance due to a lack of appropriated funds,
its property wealth for prioritization shall be reduced by 10% for each biennium
in which assistance was not provided. The reduction in property wealth for
prioritization purposes is only effective if the district actually entered
the proposed debt without state assistance prior to the deadline for a subsequent
cycle for which funds are available. Each district shall be notified of the
amount of assistance awarded and its position in the rank order for the application
cycle.
]
(m)
Prioritization and notice of
award. Upon close of the application cycle, all eligible applications shall
be ranked in order of property wealth per student in average daily attendance.
State assistance will be awarded beginning with the district with the lowest
property wealth and continue until all available funds have been utilized.
Each district shall be notified of the amount of assistance awarded and its
position in the rank order for the application cycle. A district's wealth
per student may be reduced if any or all of the following criteria are met.
(1)
A district's wealth per student is first reduced
by 10% if the district does not have any outstanding debt at the time the
district applies for assistance.
(2)
A district's wealth per student is next reduced
if a district has had substantial student enrollment growth in the preceding
five-year period. For this purpose, the district's wealth per student is reduced:
(A)
by 5.0%, if the district has an enrollment growth
rate in that period that is 10% or more but less than 15%;
(B)
by 10%, if the district has an enrollment growth
rate in that period that is 15% or more but less than 30%; or
(C)
by 15%, if the district has an enrollment growth
rate in that period that is 30% or more.
(3)
If a district has submitted an application with
eligible debt and has not previously received any assistance due to a lack
of appropriated funds, its property wealth for prioritization shall be reduced
by 10% for each biennium in which assistance was not provided. The reduction
is calculated after reductions for outstanding debt and enrollment are completed,
if applicable. This reduction in property wealth for prioritization purposes
is only effective if the district actually entered the proposed debt without
state assistance prior to the deadline for a subsequent cycle for which funds
are available.
(n)
[
(m)
] Bond taxes. A school district
that receives state assistance must levy and collect sufficient interest and
sinking fund taxes to meet its local share of the debt service requirement
for which state assistance is granted. Failure to levy and collect sufficient
taxes shall result in pro rata reduction of state assistance. The requirement
to levy and collect interest and sinking fund taxes specified in this subsection
may be waived at the discretion of the commissioner for a school district
that must maintain local maintenance tax effort in order to continue receiving
federal impact aid.
(o)
[
(n)
] Exclusion from taxes. The taxes
collected for bonded debt service for which funding under TEC, Chapter 46,
is granted shall be excluded from the tax collections used to determine the
amount of state aid under TEC, Chapter 42. For a district operating with a
waiver as described in subsection
(n)
[
(m)
] of this
section, the amount of the local share of the allotment shall be subtracted
from the total tax collections used to determine state aid under TEC, Chapter
42.
(p)
[
(o)
] Calculation of bond tax rate
(BTR) for lease-purchase arrangements. The value of BTR in the formula for
state assistance for a lease-purchase arrangement shall be calculated based
on the lease- purchase payment requirement, not to exceed the relevant limitations
described in this section. The lease- purchase payment shall be divided by
the guaranteed level (FYL), then by average daily attendance (ADA), then by
100. The value of BTR shall be subtracted from the value of district tax rate
(DTR) as computed in TEC, §42.302, prior to limitation imposed by TEC, §42.303.
(q)
[
(p)
] Continued treatment of taxes
and lease-purchase payments.
Taxes associated with bonded debt may not
be considered for state aid under TEC, Chapter 42.
[
Once approved
for funding under TEC, Chapter 46, a district may not select whether taxes
associated with the bonded debt are considered for purposes stated in TEC,
Chapter 46, or Chapter 42. Until approved for assistance under TEC, Chapter
46, taxes collected for debt service may be considered in the calculation
of state aid in TEC, Chapter 42.
] Bonded debt service or lease-purchase
payments that were excluded from consideration for state assistance due to
prioritization or due to the limitation on assistance may be considered for
state assistance in subsequent biennia through additional applications. A
modified application may be provided for previously rejected debt service
or lease-purchase payments.
(r)
[
(q)
] Variable rate bonds. Variable
rate bonds are eligible for state assistance under the Instructional Facilities
Allotment. For purposes of calculating the biennial limitation on access to
the allotment, the payment requirement for a variable rate bond shall be valued
at the interest rate specified in the official statement (or draft) as the
rate to be used in calculating the minimum amount a district must budget for
payment of interest cost and the scheduled minimum mandatory redemption amount,
if applicable. For purposes of calculating state assistance under TEC, Chapter
46, the lesser of the actual interest rate or that used for the calculation
of the limitation on access to the allotment shall be used. A district may
exercise its ability to make payments in amounts in excess of the minimum,
but the excess amount shall not be used in determining the value of BTR or
in the calculation of state assistance under TEC, Chapter 46, in that year.
(s)
[
(r)
] Reports required. The commissioner
may require such information and reports as are necessary to assure compliance
with applicable laws. The commissioner may require immediate notification
by the district of relevant financing activities such as refunding or refinancing
of bond issues, renegotiation of lease-purchase terms, change in use of bond
proceeds, or other actions taken by the district that might affect state funding
requirements.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State, on August 14, 2000.
TRD-200005684
Criss Cloudt
Associate Commissioner, Policy Planning and Research
Texas Education Agency
Earliest possible date of adoption: September 24, 2000
For further information, please call: (512) 463-9701