19 TAC §61.1035
The Texas Education Agency (TEA) proposes an amendment to §61.1035,
concerning assistance with payment of existing debt. This proposed amendment
replaces an earlier version that was filed as proposed in the December 26,
2003, issue of the
Texas Register
(28 TexReg
11462), which has been withdrawn.
Like the earlier version, the proposed amendment modifies eligibility for
the Existing Debt Allotment (EDA) based on changes to statutory language,
in accordance with House Bill 3459, 78th Texas Legislature, 2003. Several
of the proposed changes are intended to clarify which bond payments are eligible
for state assistance and the limitations on that assistance in the EDA program
and to specify the required supporting documentation. Another proposed change
clarifies the requirements related to local tax effort.
Through 19 TAC §61.1035, adopted to be effective December 12, 1999,
the commissioner exercised rulemaking authority relating to assistance with
payment of existing debt. The current provisions include the establishment
of eligibility; definition of qualifying debt service; and explanations of
limits on assistance, data and payment cycles, deposits and uses of funds,
and refinancing of eligible debt. House Bill 3459 modified Texas Education
Code (TEC), Chapter 46, changing the eligibility criteria for the Existing
Debt Allotment. The proposed amendment to 19 TAC §61.1035 modifies language
describing the eligibility criteria needed to reflect the legislative change
as well as providing several additional clarifications. This proposed amendment
provides more specifications related to eligible bond payments, limitations
on adjustments, and required supporting documentation than the previous withdrawn
version. These additional changes are the result of the process to update
the information the agency maintains about school district bonds.
Language is added in subsection (a)(1) to specify that payment on bonds
must have been made on or before August 31, 2003, in order to meet eligibility
criteria. Language is also added to this subsection to specify the required
supporting documentation needed to demonstrate EDA eligibility. A new subsection
(a)(3) is added to clarify that state assistance applies to bond payments
made between September 1 and August 31 of each year. Existing subsection (a)(3)
is renumbered accordingly.
Language in subsection (b)(1)(D) is modified to clarify the application
of excess tax collections in order to simplify the process and eliminate a
report that has been required of school districts. Language is also added
in subsection (b)(3) to clarify the application of excess tax collections
as well as Interest and Sinking (I&S) fund taxes.
Language is added to subsection (c)(1)(A) and (B) to clarify the calculation
of the existing debt tax rate (EDTR) during the last fiscal year of a biennium.
New language is added as subsection (d)(2)(C) to limit adjustments to prior
year allotments.
Language is added to subsection (f)(1) to clarify which documents are necessary
to verify the debt service attributed to eligible refunded bonds. Language
is added to subsection (f)(4) to clarify the limitation on the total debt
service eligible for state assistance.
Joe Wisnoski, deputy associate commissioner for school finance and fiscal
analysis, has determined that for the first five-year period the amendment
is in effect there will be no fiscal implications for state or local government
as a result of enforcing or administering the amendment. The statutory changes
will increase the state aid to local school districts for the EDA.
Mr. Wisnoski has determined that for each year of the first five years
the amendment is in effect the public benefit anticipated as a result of enforcing
the amendment will be the clarification of which debt is eligible for state
assistance through EDA and the calculation of the limits on that assistance.
The proposed amendment also clarifies the application of local school district
taxes for the purpose of meeting local share requirements. There will not
be an effect on small businesses. There is no anticipated economic cost to
persons who are required to comply with the amendment as proposed.
Comments on the proposal may be submitted to Cristina De La Fuente-Valadez,
Policy Coordination, 1701 North Congress Avenue, Austin, Texas 78701, (512)
475-1497. Comments may also be submitted electronically to
rules@tea.state.tx.us
or faxed to (512) 463-0028. All requests for
a public hearing on the proposed amendment 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, §46.031
and §46.061, which authorize the commissioner of education to adopt rules
for the administration of TEC, Chapter 46, Subchapter B, Assistance with Payment
of Existing Debt, and to by rule provide for the payment of state assistance
under TEC, Chapter 46, to refinance school district debt.
The amendment implements the Texas Education Code, §§46.031,
46.032, 46.033, 46.034, 46.035, 46.036, and 46.061.
§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.
The district must have made a payment on the bonds on or before August 31,
2003.
Lease-purchase arrangements authorized by Local Government Code, §271.004,
are not eligible.
Payments demonstrating eligibility for the EDA must
appear on the debt service schedule contained in the final official statement
or bond order.
(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)
Eligible bond payments include
regularly scheduled principal and interest payments that are made between
September 1 and August 31 each year.
(4)
[
(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)
The
[
Districts must inform the
] commissioner
of education
will determine the amount
of
excess collections,
[
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
collected during a school year
will be attributed first to satisfy the local share requirement of
debts
eligible
for
EDA
state aid for that school year
[
debts
], second to satisfy the local share requirements
of any IFA debts
for that school year
, 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
collected
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
on eligible bonds
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.
(C)
Adjustments to state assistance
based on changes in the final counts of ADA or changes to a district's property
value must be requested no later than three years following the close of the
school year for which the adjustment is sought.
(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
, including payment schedules for the refunded debt that clearly identify
the bonds being refunded and the debt service attributable to the refunded
bonds, if available. State aid payments for EDA will not be processed until
these documents have been received by the TEA division responsible for state
funding
.
(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.
The total debt service eligible
for state assistance will be limited to the district's total debt service
prior to January 1 of the last fiscal year of the preceding state fiscal biennium.
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 April 26, 2004.
TRD-200402752
Cristina De La Fuente-Valadez
Director, Policy Coordination
Texas Education Agency
Earliest possible date of adoption: June 6, 2004
For further information, please call: (512) 475-1497