19 TAC §61.1032
The Texas Education Agency (TEA) adopts an amendment to §61.1032,
concerning administration of the instructional facilities allotment (IFA)
program, with changes to the proposed text as published in the August 25,
2000, issue of the
Texas Register
(25 TexReg
8122). 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 adopted 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 46, Subchapter
B, Assistance with Payment of Existing Debt, enacted by SB 4, 76th Texas Legislature,
1999. The amendment clarifies the language related to debt eligibility for
lease-purchase agreements, additional applications and deadlines, prioritization
criteria, and treatment of taxes. The 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.
In response to comments, the following changes have been made to the section
since published as proposed.
Language was added to subsection (f) to address increases in a district's
debt allotment to pay for increases in debt service payments and to clarify
the calculation basis for approval of additional applications.
Language was modified in and added to subsection (j)(1) to edit and clarify
that payments are only to be made after the contract for lease-purchase financing
has been "authorized," rather than "executed."
Subsection (l) was reorganized to clarify provisions related to additional
application cycles.
Language was added to subsection (l)(1) to establish that the commissioner
will conduct an annual application cycle with a deadline of June 15 every
year and that the commissioner will cancel the June 15 deadline if no funding
is available.
Subsection (l)(2) was divided into new subsections (l)(2) and (l)(3) to
clarify that an announcement of an additional application cycle will be made
if funds are still available after the June 15 annual cycle.
Language was modified in subsection (l)(5), previously denoted as subsection
(l)(4), to delete language related to the resolution of a trust agreement
for the sale of revenue bonds.
In addition, a technical edit modified language in subsection (s) to reinforce
the requirement of necessary information and reports to assure compliance
with applicable laws and immediate notification by districts of relevant financing
activities.
The following comments were received regarding adoption of the amendment.
Comment. A financial advisor representing school districts and a representative
from the Equity Center, an organization representing a coalition of low-wealth
districts, requested changes to subsection (e) that would allow districts
to undertake lease/purchase financing to achieve the level of annual debt
service and tax rate required to maximize IFA funding over two consecutive
years, even if the second year occurs in a succeeding biennium.
Agency Response. The agency disagrees with this requested change. The agency
believes that the need for greater certainty on the amount of state funds
to be awarded in a biennium outweighs the concerns stated by the comment.
The award of funds for future increases could result in a failure to utilize
all state appropriations efficiently within the biennium.
Comment. A private consulting firm suggested the addition of wording in
subsection (f) related to increases in a district's debt allotment to pay
for increases in debt service payments. They also suggested wording to clarify
that eligible debt service in subsequent biennia include the amount that exceeds
allotments awarded within the biennial funding calculated at the time of approved
additional applications.
Agency Response. The agency concurs with the comment and has added the
new language to subsection (f) to address increased debt service requirements
and additional applications.
Comment. A private consulting firm requested the change of the language
in subsection (j)(1) related to payment of state aid being made after the
"execution" of a lease purchase agreement.
Agency Response. The agency concurs with clarifying this language and has
revised the subsection to incorporate the main idea of the comment. However,
the agency maintains the language referring to "authorization" of the lease-purchase
agreement rather than revising the language to "execution." The agency believes
that maintaining the term "authorization" is consistent with the specific
local school board action and provides consistency throughout the rules from
which local school districts may make decisions.
Comment. A private consulting firm and a financial advisor commented that
the elimination of application deadlines in subsections (l)(1) and (l)(2)
would hamper the ability of districts to develop rational, comprehensive facilities
plans that comply with applicable state and federal laws. They commented that
the elimination of specific application deadline dates would also create a
perception of uncertainty in the administration of the program. Specifically,
the firm indicated that U.S. Department of Justice preclearance procedures
would further constrain districts from meeting applicable deadlines if the
June and December Instructional Facilities Allotment (IFA) program deadlines
were eliminated.
Agency Response. The agency partially concurs with the comment and has
modified the section to incorporate June 15 as an annual application deadline.
However, the section was also revised to clarify that a subsequent application
cycle may be conducted in the same year subject to the availability of funds
without specifically reinstating the December 15 application deadline to the
rule. Although the agency recognizes the time constraints put on school districts
by the U.S. Department of Justice requirements, the agency believes that calling
for a specific December 15 deadline adds confusion and expectation to a state-funded
program process. Availability of funds after the June 15 deadline will be
determined and the commissioner will have the authority to call for an application
cycle thereafter, giving districts ample opportunity to apply for funds.
Comment. A private consulting firm requested a change in the reference
to an eligible and completed lease-purchase agreement from "authorizing" to
"execution" in subsection (l)(5), previously denoted as (l)(4).
Agency Response. The agency maintains that the term "authorizing" is consistent
throughout the rule and provides local school board trustees specific guidance
for remaining eligible for funding. In addition, the agency has deleted the
language related to the resolution of a trust agreement for the sale of revenue
bonds. The agency believes that the act that the local school board of trustees
takes by authorizing a lease purchase agreement is the determining factor
in maintaining eligibility.
The amendment is adopted 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.
§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 bonded debt service must be
made prior to the passage of an order by the school district board of trustees
authorizing the bond issuance.
(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)
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)
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)
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)
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 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.
(f)
Additional applications. For previously awarded debt, increases
in a district's debt allotment to pay for increases in debt service payment
requirements in subsequent biennia must receive approval through one or more
additional application(s). The portion of any increase in eligible, qualified
debt service that may be funded in subsequent biennia is the amount that exceeds
any previously awarded and approved allotments, within the biennial limitation
on funding as calculated at the time of approval of the additional applications.
(g)
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)
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)
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)
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)
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 or the authorization of the lease-purchase agreement, whichever
is applicable, has occurred.
(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)
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)
Deadlines.
(1)
The commissioner of education shall conduct an annual application
cycle with a deadline of June 15 every year based on the availability of appropriations
for the purpose of awarding new allotments. If no funding is available, the
commissioner shall cancel the June 15 deadline. The commissioner may conduct
more than one application cycle to allocate funding appropriated for a fiscal
year.
(2)
If funds are still available after conducting the June
15 annual cycle, the commissioner shall announce the TEA's intention to have
an additional application cycle no less than 90 days prior to the application
deadline.
(3)
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.
(4)
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.
(5)
If the execution of the bond order or the authorizing of
a lease-purchase agreement has not taken place within 180 days of the deadline
for the current application cycle, the TEA shall consider the application
withdrawn.
(6)
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.
(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)
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)
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) 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)
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)
Continued treatment of taxes and lease-purchase payments.
Taxes associated with bonded debt may not be considered for state aid under
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)
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)
Reports required. The commissioner shall require such information
and reports as are necessary to assure compliance with applicable laws. The
commissioner shall 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 adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the
Secretary of State on December 19, 2000.
TRD-200008836
Criss Cloudt
Associate Commissioner, Accountability Reporting and Research
Texas Education Agency
Effective date: January 8, 2001
Proposal publication date: August 25, 2000
For further information, please call: (512) 463-9701