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 November 30,
2001, issue of the
Texas Register
(26 TexReg
9708). 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 clarifies refinancing
issues and tax collections applicable to the IFA pursuant to the Texas Education
Code (TEC), §46.003(h) and §46.012, in conformance with changes
enacted in House Bill (HB) 2879, 77th Texas Legislature, 2001.
Prior law allowed districts to meet local share obligations for the IFA
from taxes for bonded indebtedness collected in the prior year. The 77th Texas
Legislature, 2001, expanded this provision to allow local share requirements
for the IFA to also be met with prior year bonded debt or Maintenance and
Operations taxes that were not equalized by state aid formulas in the year
of collection. The adopted amendment adds new language to clarify refinancing
issues, tax collections, and fixed-rate bonds with respect to the IFA. The
adopted amendment also modifies existing provisions relating to the timing
of authorization of bond issuance with respect to the IFA, finality of awards,
data sources, deadlines, taxes eligible for funding, and payment requirements
for variable rate bonds.
In response to public comments, the following changes were made to §61.1032
since published as proposed.
Subsection (d)(8) was modified in several ways. Proposed subparagraph (B),
adopted as subparagraph (C), was revised to be more specific as to the definition
of qualified, non-qualified projects and ineligible debt. Proposed subparagraph
(C), adopted as subparagraph (D), was revised to remove an inadvertent contradiction
relating to eligibility for future funding cycles. The provision in subparagraph
(F) was reordered to become subparagraph (A) and subsequent subparagraphs
were renumbered for consistency and clarity.
The following public comments on the proposed amendment to §61.1032
were received from a representative of First Southwest, Inc., a financial
banking company.
Comment. The commenter expressed confusion regarding the use of the word
"qualified" in subsection (d)(8)(B).
Agency Response. The agency agrees with the need for clarification and
has modified the section. Within the IFA program, the term "qualified" or
"nonqualified" is used to describe specific project costs that are to be deducted
from debt being considered for funding. A district can have "nonqualified"
projects but still may have "eligible" debt considered for IFA funding purposes.
This provision of the rule was meant to describe a circumstance in which a
district's debt or portion of its debt was previously "ineligible." In this
scenario, if the district's debt or portion of its debt was previously "ineligible,"
it would continue to be "ineligible" for purposes of the IFA program. Therefore,
the agency concurred with the comment and revised the language to be more
specific as to the definition of qualified, non-qualified projects and ineligible
debt.
Comment. The commenter expressed some confusion regarding subsection (d)(8)(C)
and its apparent contradiction to other provisions of the rule.
Agency Response. The agency agrees with the need for clarification and
has modified the section. The rule as proposed inadvertently contained the
word "not" within the provision. The use of the negation disqualified eligible
debt from consideration in the IFA program. Therefore, the agency concurred
with the comment and deleted the word "not" from the language.
Comment. The commenter suggested that the rule would make more sense and
would flow more consistently if the provision in subparagraph (F) was moved
to the beginning position of subsection (d)(8).
Agency Response. The agency agrees with the suggestion and has modified
the section. Subparagraph (F) was reordered to become subparagraph (A) and
the subsequent subparagraphs were renumbered for consistency and clarity.
The amendment is adopted under the Texas Education Code (TEC), §46.002,
which authorizes the commissioner of education to adopt rules for the administration
of TEC, Chapter 46, Assistance with Instructional Facilities and Payment of
Existing Debt, Subchapter A, 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
(IFA). The commissioner of education 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 IFA.
(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
received at the Texas Education Agency (TEA) 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 received at TEA 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.
(8)
Certain other refinanced debt may be eligible for the funding
under this subsection.
(A)
When a district issues a general obligation bond to acquire
a facility that is the subject of an existing lease-purchase arrangement of
the district, the transaction is considered a refinancing of the lease purchase
for purposes of continued participation in the IFA program.
(B)
If a lease purchase in the IFA program is refinanced with
a general obligation bond at a present value savings and without extension
of the original term of the lease-purchase agreement, the debt shall remain
part of the IFA program.
(C)
Any portion of a bond issue that refinances a portion of
a lease-purchase arrangement that was originally ineligible for IFA funding
shall remain ineligible. Ineligible debt is refunded bonds that fail to meet
the criteria under TEC, §46.007, and/or bonds used for purposes not meeting
the definition of qualified projects as described in TEC, §46.001 and §46.002.
(D)
Any portion of a bond issue that refinances a portion of
an original lease- purchase arrangement that was eligible for IFA consideration
but exceeded the IFA limit shall be eligible for consideration in future funding
cycles.
(E)
If a lease purchase that is not in the IFA program is refinanced
with a general obligation bonded debt, the bonded debt shall gain eligibility
for the IFA by the terms of that program. Any Interest and Sinking (I&S)
fund tax effort associated with the bonded debt payments may be counted for
purposes of computing the IFA. To be considered for IFA funding, the district
shall be required to apply to the program as a new debt.
(F)
If any portion of a maturity of an IFA bonded debt is refunded
at a present value cost or with an extension of the term, that portion of
the debt shall be removed from eligibility for further IFA tax effort equalization.
(G)
Debt that is refinanced in a manner that disqualifies it
for eligibility for funding within the IFA program shall be treated as new
bonded debt at the time of issuance for the purpose of funding consideration
pursuant to the Existing Debt Allotment (EDA).
(9)
In addition to I&S fund taxes collected in the current
school year, other district funds budgeted for the payment of bonds may be
eligible for the IFA program for the purpose of meeting local share requirements
pursuant to Texas Education Code, Chapter 46.
(A)
Funds budgeted by a district for payment of eligible bonds
may include I&S fund taxes collected in the 1999-2000 school year or a
later school year in excess of the amount necessary to pay the district's
local share of debt service on bonds in that year, provided that the taxes
were not used to generate other state aid.
(B)
Funds budgeted by a district for payment of eligible bonds
may include Maintenance and Operations (M&O) taxes collected in the 1999-2000
school year or a later school year that are in excess of amounts used to generate
other state aid.
(C)
The commissioner will provide each district with information
about what tax collections were not equalized by state assistance in the preceding
school year and worksheets to enable districts to calculate tax collections
that will not receive state assistance in a current school year.
(D)
Districts must inform the commissioner of amounts, if any,
to be applied to the IFA local share requirement, if such contributions are
derived from current or preceding year tax collections not equalized by state
assistance.
(10)
If a district issues debt that requires the deposit of
payments into a mandatory I&S fund or debt service reserve fund, the deposits
will be considered debt payments for the purpose of the IFA if the district's
bond covenant calls for the deposit of payments into a mandatory and irrevocable
fund for the sole purpose of defeasing the bonds or if the final statement
stipulates the requirements of the I&S fund and the bond covenant.
(11)
I&S fund taxes will be attributed first to satisfy
the local share requirement of eligible EDA debts, second to satisfy the local
share requirements of any IFA debts, and lastly to excess taxes that may raise
the limit for the EDA program in a subsequent biennium if collected in the
second year of a state fiscal biennium.
(12)
When considering application for funding, a debt which
meets the eligibility requirements of the EDA will be removed from consideration
under the IFA program to the extent that the debt may be funded by the EDA
up to the limits that apply for that program during the biennium in which
EDA funding would first be available.
(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 to TEA at the deadline
for receipt of applications for that 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 adopted by the
legislature for appropriations purposes 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 deadline for receipt of applications for that 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 defined
as 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 or the next working day after 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 eligible taxes to meet its local share of
the debt service requirement for which state assistance is granted. Failure
to levy and collect sufficient eligible taxes shall result in pro rata reduction
of state assistance. The requirement to levy and collect eligible 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 IFA. 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 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 payment or the limitation on 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)
Fixed-rate bonds. Computation for fixed-rate bonds shall
be based on published debt service schedules as contained in the official
statement. Prepayment of a bond, either through an early call provision or
some other mechanism, shall not increase the state's obligation or the computed
state aid pursuant to the IFA. To the extent that prepayments reduce future
debt service requirements, the computation of state aid shall also be appropriately
adjusted.
(t)
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 April 26, 2002.
TRD-200202611
Cristina De La Fuente-Valadez
Manager, Policy Planning
Texas Education Agency
Effective date: May 16, 2002
Proposal publication date: November 30, 2001
For further information, please call: (512) 463-9701
19 TAC §61.1035
The Texas Education Agency (TEA) adopts an amendment to §61.1035,
concerning assistance with payment of existing school district debt, with
changes to the proposed text as published in the November 30, 2001, issue
of the
Texas Register
(26 TexReg 9712). The
section specifies provisions relating to eligibility, qualifying debt service,
limits on assistance, data and payment cycles, deposits and uses of funds,
and refinancing of eligible debt. The adopted amendment clarifies refinancing
issues and tax collections applicable to the Existing Debt Allotment (EDA)
pursuant to the Texas Education Code (TEC), §46.032(c) and §46.036,
in conformance with changes enacted in House Bill (HB) 2879, 77th Texas Legislature,
2001.
Prior law allowed districts to meet local share obligations for the EDA
from taxes for bonded indebtedness collected in the prior year. The 77th Texas
Legislature, 2001, expanded this provision to allow local share requirements
for the EDA to also be met with prior year bonded debt or Maintenance and
Operations taxes that were not equalized by state aid formulas in the year
of collection. The adopted amendment adds new language to clarify refinancing
issues and qualifying debt service for meeting local share requirements. The
adopted amendment also modifies existing provisions relating to existing debt
tax rate (EDTR) calculations.
In response to public comments, the following changes were made to §61.1035
since published as proposed.
Subsection (b)(4) was modified to remove the provision in subparagraph
(D) since it is not a condition under which a district may receive state aid
in excess of their minimum variable rate payment. The provision was placed
as adopted new subsection (b)(5) as a consideration for qualifying debt service
for computing state assistance amounts. The proposed subsection (b)(5) was
renumbered and adopted as subsection (b)(6).
Subsection (f)(3) and (4) was modified to change the term "refunding action"
to "refunding pricing" in order to maintain a consistent use of terms and
reliable criteria from which to complete the application review process.
The following public comments on the proposed amendment to §61.1035
were received from a representative of First Southwest, Inc., a financial
banking company.
Comment. The commenter stated that proposed subsection (b)(4) states that
if certain conditions are met, a district may receive state aid in excess
of their minimum variable rate payment. The commenter noted that the provision
in proposed subparagraph (D) was not a condition of subsection (b)(4) as expressed
in the proposed rule and should be moved to subsection (b)(5).
Agency Response. The agency agrees and has modified the section accordingly.
Comment. The commenter suggested that language in subsection (f)(4) was
not consistent with other sections of the rule, which consistently defined
"pricing" as the legal issuance of debt.
Agency Response. The agency agrees and has modified subsection (f)(3) and
(4). In determining eligibility of debt, the agency confirms the pricing date
and utilizes it in the application review process. Unlike the concept of pricing
date, "refunding action" could have multiple meanings and is not independently
verifiable. In order to maintain a consistent use of terms and reliable criteria
from which to complete the application review process, the agency has changed
the wording "refunding action" to "refunding pricing."
The amendment is adopted under the Texas Education Code (TEC), §46.031,
which authorizes the commissioner of education to adopt rules for the administration
of TEC, Chapter 46, Assistance with Instructional Facilities and Payment of
Existing Debt, Subchapter B, Assistance with Payment of Existing Debt.
§61.1035.Assistance with Payment of Existing Debt.
(a)
Eligibility. Certain restrictions apply to debt and to
school districts eligible for the existing debt allotment (EDA).
(1)
Debt eligible for the EDA is an existing obligation of
a school district made through the issuance of a bond for instructional or
non-instructional purposes pursuant to Texas Education Code (TEC), Chapter
45, Subchapter A, or through the refunding of bonds as defined in TEC, §46.007.
Lease-purchase arrangements authorized by Local Government Code, §271.004,
are not eligible.
(2)
Eligible debt does not include any portion of an existing
obligation that has been approved for financial assistance with the Instructional
Facilities Allotment (IFA) as defined in §61.1032 of this title (relating
to Instructional Facilities Allotment), in accordance with TEC, Chapter 46.
(3)
Certain other refinanced debt may be eligible for funding
under this subsection.
(A)
A lease purchase refunded with a general obligation bond
shall be eligible for consideration for the EDA in future years based on the
date of payment on the new bond and the limits on tax rates that apply.
(B)
Any portion of a bond issue that refinances a portion of
an original lease- purchase arrangement that was eligible for IFA consideration
but exceeded the IFA limit shall be eligible for consideration in future years
pursuant to this subsection based on the date of first payment on the new
bond and the limits on tax rates that apply.
(C)
If a lease purchase that is not funded in the IFA program
is refinanced with a general obligation bonded debt, the bonded debt shall
gain eligibility for the EDA by the terms of the EDA program. Any Interest
and Sinking (I&S) fund tax effort associated with the bonded debt payments
may be counted for purposes of computing the EDA. Qualification pursuant to
this subsection shall be according to the terms of the program, including
the date of first payment on the bond and the relevant tax rate limitation.
(D)
Debt that is refinanced in a manner that disqualifies it
for eligibility for funding within the IFA program shall be treated as new
bonded debt at the time of issuance for the purpose of funding consideration
pursuant to the EDA.
(b)
Qualifying debt service. Certain district revenues may
qualify to meet the local share requirement of the EDA when computing state
assistance amounts.
(1)
I&S fund taxes collected in the current school year
may qualify toward meeting the local share requirement of the EDA. In addition,
other district funds budgeted for the payment of bonds may qualify to meet
the EDA local share requirements.
(A)
Funds budgeted by a district for payment of eligible bonds
may include I&S fund taxes collected in the 1999-2000 school year or later
school year in excess of the amount necessary to pay the district's local
share of debt service on bonds in that year, provided that the taxes were
not used to generate other state aid.
(B)
Funds budgeted by a district for payment of eligible bonds
may include Maintenance and Operations (M&O) taxes collected in the current
or previous school year that are in excess of amounts used to generate other
state aid.
(C)
The commissioner of education will provide each district
with information about what tax collections were not equalized by state assistance
in the preceding school year and worksheets to enable districts to calculate
tax collections that will not receive state assistance in a current school
year.
(D)
Districts must inform the commissioner of education of
amounts, if any, to be applied to the EDA local share requirement, if such
contributions are derived from current or preceding year tax collections not
equalized by state assistance.
(2)
If a district issues debt that requires the deposit of
payments into a mandatory I&S fund or debt service reserve fund, the deposits
will be considered debt payments for the purpose of the EDA if the district's
bond covenant calls for the deposit of payments into a mandatory and irrevocable
fund for the sole purpose of defeasing the bonds or if the final statement
stipulates the requirements of the I&S fund and the bond covenant.
(3)
I&S fund taxes will be attributed first to satisfy
the local share requirement of eligible EDA debts, second to satisfy the local
share requirements of any IFA debts, and lastly to excess taxes that may raise
the limit for the EDA program in a subsequent biennium if collected in the
second year of a state fiscal biennium.
(4)
Computation of state aid in the EDA program for a variable
rate bond shall be based on the minimum payment requirement. A district may
receive such state aid for payment on a variable rate bond in excess of the
minimum payment requirement as long as the additional amount meets certain
conditions.
(A)
The payment is necessary to meet the computed interest
costs for the year.
(B)
The amount shall not exceed the applicable limit for debt
established pursuant to TEC, §46.034(b).
(C)
The district shall notify the commissioner of education
of its intent prior to the adoption of the district's tax rate for debt service
for the applicable year.
(5)
A district may exercise its ability to make payments in
excess of the minimum payment required but the excess amount shall not be
used in determining the limit on the existing debt tax rate (EDTR) or in the
calculation of state assistance in that year.
(6)
Computation for fixed-rate bonds shall be based on published
debt service schedules as contained in the official statement. Prepayment
of a bond, either through an early call provision or some other mechanism,
shall not increase the state's obligation or the computed state aid pursuant
to the EDA. To the extent that prepayments reduce future debt service requirements,
the computation of state aid shall also be appropriately adjusted.
(c)
Limits on assistance. The amount of state assistance is
limited by the lesser of a calculated EDTR for eligible debt or an appropriated
debt tax limit.
(1)
The calculated EDTR is a rate determined with the debt
limit resulting from the lesser of calculations specified in subparagraphs
(A) or (B) of this paragraph.
(A)
EDTR may be calculated as the I&S fund taxes for eligible
bonds for the last fiscal year of the preceding state fiscal biennium divided
by the property value used for state funding purposes in that year, then multiplied
by 100.
(B)
EDTR may be calculated as the current year debt service
payment divided by the product of the current year average daily attendance
(ADA) multiplied by $35, then divided by $100.
(2)
The EDTR used in the funding formula cannot exceed the
appropriated limit ($.29).
(3)
For purposes of computing EDTR, tax collections or payment
amounts associated with bonded debt in the IFA program shall be excluded from
the calculation.
(d)
Data and payment cycles. The necessary data elements to
calculate state assistance for existing debt and the associated payment cycle
are determined by the commissioner of education.
(1)
An initial, preliminary payment of state assistance will
be made as soon as practicable after September 1 of each year. This payment
will be based on an estimate of ADA; the taxable value of property certified
by the Comptroller of Public Accounts for the preceding school year as determined
in accordance with Government Code, Chapter 403, Subchapter M; and the amount
of taxes budgeted to be collected for payment of eligible bonds. Districts
will supply information about budgeted taxes in July on a data collection
survey.
(2)
A final determination of assistance for a school year will
be made at the close of business for the current school year when final counts
of ADA and collection amounts for eligible debt are available. This determination
will also take into account, if applicable, a reduced property value that
reflects either a rapid decline pursuant to TEC, §42.2521, or a grade
level adjustment pursuant to TEC, §42.106.
(A)
Any additional amounts owed will be paid as soon as practicable
after the final determination is made.
(B)
Any overpayment will be subtracted from the EDA in the
subsequent year. If no such assistance is due in the subsequent school year,
the Foundation School Fund will be reduced accordingly. If no payments are
due from the Foundation School Fund, the district will be notified about the
overpayment and must remit that amount to the Texas Education Agency (TEA)
no later than three weeks after notification.
(e)
Deposit and uses of funds.
(1)
Funds received from the state for assistance with existing
debt must be deposited in the district's I&S fund and must be taken into
account before setting the I&S fund tax rate.
(2)
State and local shares of the EDA must be used for the
exclusive purpose of making principal and interest payments on eligible debt.
(f)
Refinancing of eligible debt.
(1)
A district that refinances eligible debt in part or in
full must inform the TEA's division responsible for state funding in writing
and must provide appropriate documentation related to the refinancing.
(2)
The portion of the debt eligible for state assistance on
refunded bonds is subject to the same limits as eligible debt that has not
been refinanced.
(3)
If a refunding pricing of a district decreases the current
year bond payment requirement, the reduced payment amount shall be the basis
of determining the limit on funding.
(4)
If a refunding pricing of a district increases the bond
payment requirement, the amount of increase shall not be used to determine
state aid unless the pricing took place prior to January 1 of the last fiscal
year of the preceding state fiscal biennium.
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 April 26, 2002.
TRD-200202612
Cristina De La Fuente-Valadez
Manager, Policy Planning
Texas Education Agency
Effective date: May 16, 2002
Proposal publication date: November 30, 2001
For further information, please call: (512) 463-9701