Chapter 251 Oregon Laws 1999

Session Law

AN ACT

HB 3428

Relating to the Oregon School Bond Guaranty Act; amending sections 2, 3, 4, 5, 6, 7, 8 and 9, chapter 614, Oregon Laws 1997; and declaring an emergency.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Section 2, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 2. As used in sections 2 to 9, chapter 614, Oregon Laws 1997 [of this Act]:

[(1) "Bond" means any general obligation bond or general obligation refunding bond issued under ORS 328.205 to 328.304, 334.125 or 341.675 to 341.702 after the effective date of this Act.]

[(2)] (1) "Common School Fund" means the state school fund described in section 2, Article VIII, Oregon Constitution.

[(3) "Default avoidance program" means the school bond guaranty program established by sections 2 to 9 of this Act.]

[(4)] (2) "General obligation bond" has the meaning given that term in ORS 288.150. [means any bond of a school district board payable in whole or in part from revenues derived from ad valorem taxes that constitutes an indebtedness within the meaning of any applicable constitutional, statutory or local debt limitation and that is secured by the unlimited taxing power of the school district.]

[(5)] (3) "Paying agent" means the corporate paying agent selected by the school district board for a school bond issue who is:

(a) Duly qualified; and

(b) Acceptable to the State Treasurer.

[(6) "Refunding bond" means any general obligation bond issued by a school district for the purpose of refunding its outstanding general obligation bonds.]

(4) "School bond" means any general obligation bond issued by a school district.

[(7)] (5) "School district" means a common or union high school district, an education service district or a community college district.

(6) "State bonds" means those general obligation bonds issued by the State of Oregon to meet its obligations under the state guaranty as described in section 8, chapter 614, Oregon Laws 1997.

(7) "State guaranty" means the pledge of the full faith and credit and taxing power of the State of Oregon to guarantee payment of eligible school bonds as set forth in sections 2 to 9, chapter 614, Oregon Laws 1997.

SECTION 2. Section 3, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 3. (1)(a) The State Treasurer may, by issuing a certificate of qualification to a school district, pledge the full faith and credit and taxing power of the state to guarantee full and timely payment of the principal of, either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment, and interest on school bonds as such payments shall become due, except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration.

(b) The state guaranty [authorized by sections 2 to 9 of this Act] shall not extend to the payment of any redemption premium.

(c) Reference to sections 2 to 9, chapter 614, Oregon Laws 1997, [of this Act] by its title on the face of any school bond for which the State Treasurer has issued a certificate of qualification that is effective as of the date of the issuance of the school bond conclusively establishes the state guaranty [provided to that bond under sections 2 to 9 of this Act].

[(2) Any bond guaranteed under sections 2 to 9 of this Act that is refunded under ORS 288.605 to 288.695, 328.280 or 341.697 no longer has the benefit of the guaranty provided by sections 2 to 9 of this Act from and after the date on which that bond was considered to be paid.]

(2) Any school bond that has been refunded and was originally issued with a state guaranty will no longer have the benefit of the state guaranty. For purposes of this subsection, a school bond has been refunded if proceeds are deposited irrevocably in escrow to defease the applicable school bond.

(3) Only [validly issued] school bonds issued under a valid certificate after [the effective date of this Act] December 3, 1998, may be eligible for the state guaranty [guaranteed under sections 2 to 9 of this Act].

SECTION 3. Section 4, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 4. (1) Any school district may request that the State Treasurer issue a certificate evidencing qualification of its school bonds for the [state's guaranty under sections 2 to 9, chapter 614, Oregon Laws 1997 of this Act] state guaranty.

(2) The State Treasurer may, in accordance with ORS 183.310 to 183.550, adopt and enforce rules that prescribe procedures for school district applications to qualify for the certificate of qualification and state guaranty [provided under sections 2 to 9 of this Act] and rules that prescribe the standards a school district must meet to qualify and to maintain qualification. The State Treasurer, by rule, may establish, but shall not be limited to:

(a) A requirement that a school district pay a processing fee, sufficient to defray the State Treasurer's costs in processing and verifying applications, for each application and each application for annual renewal of a certificate of qualification.

(b) Deadlines or application periods in which school districts must submit applications.

(c) The character, quality and currency of the information on the financial affairs and condition of a school district that must be submitted for a school district's application to be considered.

(d) The form and character of any certifications or affidavits required of officials of the applying school districts concerning the accuracy and completeness of the information provided in conjunction with the district's application.

(e) Any other matters necessary to making reliable assessments of the fiscal and financial affairs and condition of applying school districts.

(f) The manner of designating the particular school bonds to which the State Treasurer's certificate of qualification and the state guaranty applies.

(g) Subject to Article XI-K of the Oregon Constitution, reasonable limitations on:

(A) The total aggregate outstanding amount of all school [district general obligation] bonds the state may guarantee[, and reasonable limitations on]; and

(B) The outstanding amount of the [general obligation] school bonds of any single school district the state may guarantee.

(h) The method of providing notice of denial of a certificate of qualification.

(i) The method of providing notice of disqualification to school districts that fail to qualify or for which changes in financial affairs or condition or failure to provide the State Treasurer current or updated information warrant disqualification of the school district.

(j) Requirements for promptly reporting to the State Treasurer any changes in condition or occurrences that may affect a school district's eligibility to qualify or maintain its qualification to participate in the state guaranty program.

(3)(a) After reviewing the request, if the State Treasurer determines that the school district is eligible, the State Treasurer shall promptly issue the certificate of qualification and provide it to the requesting school district.

(b)(A) Unless the certificate of qualification is revoked by the State Treasurer, and subject to the fulfillment of any conditions or requirements imposed by the State Treasurer, the school district receiving the certificate and all other persons may rely on the certificate as evidencing eligibility for the state guaranty for one year from and after the date of the certificate.

(B) No revocation of a certificate of qualification shall affect the [validity of the state's] state guaranty of any outstanding school bonds previously issued under a valid certificate [that was in effect with respect to the bonds at the time the bonds were issued].

(4) Any qualified school district that chooses to forgo the benefits of the state guaranty [provided by sections 2 to 9 of this Act] for a particular issue of school bonds may do so by not referring to sections 2 to 9, chapter 614, Oregon Laws 1997, [of this Act] on the face of its school bonds.

(5) No school district that has school bonds, the principal of or interest on which has been paid in whole or in part by the state under [sections 2 to 9] section 6, chapter 614, Oregon Laws 1997 [of this Act], may be eligible to issue any additional school bonds with the state guaranty [guaranteed by sections 2 to 9 of this Act] until:

(a) All payment obligations of the school district to the state [under the default avoidance program are] under section 7, chapter 614, Oregon Laws 1997, are satisfied; and

(b) The State Treasurer certifies in a writing, to be kept on file by the State Treasurer, that the school district is fiscally solvent.

[(6) Bonds not guaranteed by sections 2 to 9, chapter 614, Oregon Laws 1997, of this Act are not included in the definition of "bond" in section 2, chapter 614, Oregon Laws 1997, of this Act and are not subject to the requirements of and do not receive the benefits of sections 2 to 9, chapter 614, Oregon Laws 1997 of this Act.]

SECTION 4. Section 5, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 5. (1)(a) If the State Treasurer determines that the state should not guarantee the school bonds of a school district, the State Treasurer shall:

(A) Prepare a determination of ineligibility; and

(B) Keep the determination on file in the office of the State Treasurer.

(b) The State Treasurer may remove a school district from the status of ineligibility and may issue a certificate of qualification for that school district when a subsequent application of the school district evidences that it is no longer imprudent for the state to guarantee the school bonds of that school district.

(2) Nothing in this section affects the [state's] state guaranty of school bonds of a school district issued:

(a) Before determination of ineligibility or before revocation of a certification of qualification;

(b) After the eligibility of the school district is restored; or

SECTION 5. Section 6, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 6. (1)(a) [The business administrator of] Each school district with outstanding, unpaid school bonds issued with the state guaranty shall transfer moneys sufficient for the scheduled debt service payment to its paying agent at least 15 days before any principal or interest payment date for the school bonds.

(b) The paying agent may, if instructed to do so by the [business administrator] school district, invest the moneys for the benefit of the school district until the payment date.

(c) A [business administrator who] school district that is unable to transfer the scheduled debt service payment to the paying agent 15 days before the payment date shall immediately notify the paying agent and the State Treasurer by:

(A) Telephone;

(B) A writing sent by facsimile transmission; and

(2) If sufficient funds are not transferred to the paying agent as required by subsection (1) of this section, the paying agent shall notify the State Treasurer of that failure at least 10 days before the scheduled debt service payment date by:

(a) Telephone;

(b) A writing sent by facsimile transmission; and

(3)(a) If sufficient moneys to pay the scheduled debt service payment have not been transferred to the paying agent, the State Treasurer shall, on or before the scheduled payment date, transfer sufficient moneys to the paying agent to make the scheduled debt service payment.

(b) The payment by the State Treasurer:

(A) Discharges the obligation of the issuing school district to its bondholders for the payment; and

(B) Transfers the rights represented by the general obligation of the school district from the bondholders to the state.

(c) The school district shall pay to the State Treasurer all amounts paid by the treasurer to the paying agent, as well as interest, penalties and any additional costs incurred by the treasurer, as provided in section 7, chapter 614, Oregon Laws 1997 [the transferred obligation to the state as provided in sections 2 to 9, chapter 614, Oregon Laws 1997 of this Act].

SECTION 6. Section 7, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 7. (1)(a) If one or more payments on school bonds are made by the State Treasurer as provided in section 6, chapter 614, Oregon Laws 1997 [of this Act], the State Treasurer shall pursue recovery from the school district of all moneys necessary to reimburse the state for all amounts paid by the treasurer to the paying agent, as well as interest, penalties and any additional costs incurred by the treasurer as described in this section [as required by sections 2 to 9, chapter 614, Oregon Laws 1997 of this Act]. In seeking recovery, the State Treasurer may:

(A) Intercept any payments from the General Fund, the State School Fund, the income of the Common School Fund and any other source of operating moneys provided by the state to the school district that issued the school bonds that would otherwise be paid to the school district by the state; and

(B) Apply any intercepted payments to reimburse the state for payments made pursuant to the [state's] state guaranty until all obligations of the school district to the state arising from those payments, including interest and penalties, and any additional costs incurred by the treasurer as described in this section are paid in full.

(b) The state has no obligation to the school district or to any person or entity to replace any moneys intercepted under authority of this section.

(2) The school district that issued school bonds for which the state has made all or part of a debt service payment shall:

(a) Reimburse all moneys drawn or paid by the State Treasurer on its behalf;

(b) Pay interest to the state on all moneys paid by the state from the date the moneys were drawn to the date they are repaid at a rate to be determined by the State Treasurer, in the State Treasurer's discretion, to be sufficient to cover the costs of funds to the state plus the costs of administration of the state guaranty obligation and of collection of reimbursement; and

(c) Pay [all] any applicable penalties as described in subsection (3) of this section [required by sections 2 to 9, chapter 614, Oregon Laws 1997 of this Act].

(3)(a) The State Treasurer shall establish the reimbursement interest rate after considering the circumstances of any prior draws by the school district on the state, market interest and penalty rates and the cost of funds, if any, that were required to be used or borrowed by the state to make payment on the school bonds. The State Treasurer shall have authority to establish, by negotiations with the school district or otherwise, any plan of reimbursement by the school district that will result in full and complete reimbursement to the state. Subject to the requirement for full and complete reimbursement, the State Treasurer may consider incorporating into the reimbursement plan the means and methods to allow the school district to continue its operations during the time the reimbursement plan is in effect.

(b) The State Treasurer may, after considering the circumstances giving rise to the failure of the school district to make payment on its school bonds in a timely manner, impose on the school district a penalty of not more than five percent of the amount paid by the state pursuant to [its] the state guaranty for each instance in which a payment by the state is made.

(4)(a) If the State Treasurer determines that amounts obtained under this section will not reimburse the state in full within the time determined by the State Treasurer or incorporated in the reimbursement plan from the state's payment of a school district's debt service payment, the State Treasurer shall pursue any legal action, including but not limited to mandamus, against the school district or school district board to compel the school district to:

(A) Levy and provide property tax revenues to pay debt service on its school bonds and other obligations when due; and

(B) Meet its repayment obligations to the state.

(b) [In pursuing its rights under paragraph (a) of this subsection] With respect to any school bonds for which the State Treasurer has made payment under the state guaranty, and in addition to any other rights or remedies available at law or in equity, the state shall have the same substantive and procedural rights as would a holder of the school bonds of a school district[, disregarding any limitations on the exercise of a bondholder or trustee's enforcement rights that may be imposed by the school district bonds or by any indenture, ordinance or other document issued in connection with the bonds].

(d) The school district shall pay the attorney fees, expenses and costs of the State Treasurer and the Attorney General.

(5)(a) Except as provided in paragraph (c) of this subsection, any school district whose funds were intercepted under this section may replace those funds from other school district moneys or from ad valorem property taxes, subject to the limitations provided in this subsection.

(b) A school district may use ad valorem property taxes or other moneys to replace intercepted funds only if the ad valorem property taxes or other moneys were derived from:

(A) Taxes originally levied to make the payment, but which were not timely received by the school district;

(B) Taxes from a special levy imposed to make up the missed payment or to replace the intercepted moneys;

(C) Moneys transferred from any lawfully available funds of the school district or the undistributed reserves, if any, of the school district; or

(D) Any other source of moneys on hand and legally available.

(c) Notwithstanding paragraphs (a) and (b) of this subsection, a school district may not replace operating funds intercepted by the state with moneys collected and held to make payments on school bonds if that replacement would divert moneys from the payment of future debt service on the school bonds and increase the risk that the [state's] state guaranty would be called upon a second time.

SECTION 7. Section 8, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 8. (1) If, at the time the state is required to make a debt service payment under [its] the state guaranty on behalf of a school district, sufficient moneys of the state are not on hand and available for that purpose, the State Treasurer may, singly or in any combination:

(a) Obtain from the Common School Fund or from any other state funds that qualify to make a loan under ORS 293.205 to 293.225, if the loan would satisfy the requirements of ORS 293.205 to 293.225, a loan sufficient to make the required payment.

(b) Borrow money, if economical and convenient, as authorized by ORS 288.165.

(d) With the approval of the Legislative Assembly, or the Emergency Board if emergency funds are lawfully available for making the required payment in the interim between sessions of the Legislative Assembly, pay moneys from the General Fund or any other funds lawfully available for the purpose or from emergency funds amounts sufficient to make the required payment.

(2)[(a)] The State Treasurer may issue [general obligation] state bonds to meet [its] the state guaranty obligations under [sections 2 to 9 of this Act] chapter 614, Oregon Laws 1997, pursuant to Article XI-K of the Oregon Constitution. The issuance of such state [general obligation bonds under sections 2 to 9, chapter 614, Oregon Laws 1997, of this Act] bonds shall be at the determination of the State Treasurer and is exempt from ORS 286.505 to 286.545.

[(b) Bonds issued may be refunded, using the procedures set forth in sections 2 to 9, chapter 614, Oregon Laws 1997, of this Act for the issuance of bonds, in an amount that is not more than the amount necessary to pay principal of and accrued but unpaid interest on any refunded bonds plus all costs of issuance, sale and delivery of the refunding bonds.]

(3) Before issuing or selling any [general obligation bonds to other than a state fund or account] state bonds, the State Treasurer shall prepare a written plan of financing that shall provide for:

(a) The terms and conditions under which the state bonds will be issued, sold and delivered, in accordance with any applicable provisions of ORS chapters 286 and 288;

(b) The taxes or revenues to be anticipated;

(d) The sources of payment of the state bonds;

(e) The rate or rates of interest, if any, on the state bonds or a method, formula or index under which the interest rate or rates on the state bonds may be determined during the time the state bonds are outstanding; and

(f) [All] Any other details relating to the issuance, sale and delivery of the state bonds, as may be required by the applicable provisions of ORS chapters 286 and 288. For purposes of ORS chapters 286 and 288, the office of the State Treasurer shall be deemed the relevant state agency authorizing the issuance of bonds and for whose benefit the bonds are issued.

(4) In identifying the taxes or revenues to be anticipated and the sources of payment of the state bonds in the financing plan, the State Treasurer may include:

(a) The intercepted revenues authorized by section 7, chapter 614, Oregon Laws 1997 [of this Act]; or

[(b) The proceeds of refunding bonds; or]

[(c)] (b) Any other source of repayment or lawfully available funds and any combination of [paragraphs (a) to (c)] this paragraph and paragraph (a) of this subsection.

(5) The State Treasurer may include in the plan of financing the terms and conditions of arrangements entered into by the State Treasurer on behalf of the state with financial and other institutions for letters of credit, standby letters of credit, reimbursement agreements and remarketing, indexing and tender agent agreements to secure the state bonds, including payment from any legally available source of fees, charges or other amounts coming due under the agreements entered into by the State Treasurer.

(6)(a) When issuing the state bonds, the State Treasurer shall establish the interest, form, manner of execution, payment, manner of sale, prices at, above or below the face value and all details of issuance of the state bonds in accordance with any applicable provisions of ORS chapters 286 and 288.

(b) Each state bond shall recite that it is a valid obligation of the state and that the full faith, credit and resources of the state are pledged for the payment of the principal of and interest on the state bond from the taxes or revenues identified in accordance with its terms and the Oregon Constitution and other laws of this state.

(7) Upon the completion of any sale of the state bonds, the State Treasurer shall credit the proceeds of the sale, other than accrued interest and amounts required to pay costs of issuance of the state bonds, to the fund or account established by the State Treasurer to be applied to the purpose for which the state bonds were issued.

SECTION 8. Section 9, chapter 614, Oregon Laws 1997, is amended to read:

Sec. 9. [(1) If the State Treasurer determines that it is necessary to satisfy the state's obligation to make payment amounts sufficient to satisfy either the obligations of school district bonds, the terms of a loan under section 8, chapter 614, Oregon Laws 1997, of this Act or the obligations of state general obligations issued under section 8, chapter 614, Oregon Laws 1997 of this Act, the State Treasurer shall immediately notify the Director of the Oregon Department of Administrative Services of that determination. The director shall treat the notice as a certification of a deficit in funds available to pay principal and interest in a general obligation bond program under ORS 291.445. Upon confirmation of the deficit in funds available to pay principal and interest under this section, the amount of the deficit, together with any other deficit that is certified for any other general obligation bond program, shall upon certification constitute a state tax levy on property that shall be apportioned among and charged to the several counties in that proportion that the total assessed value of all the taxable property in each county bears to the total assessed value of all the taxable property of the state as equalized, in the manner provided by ORS 291.445.] If the State Treasurer issues state bonds, the treasurer shall be subject to the provisions of ORS 291.445 as an agency that is authorized to issue general obligation bonds that are ordinarily to be repaid from General Fund appropriations.

[(2) If moneys expected to be intercepted under section 7, chapter 614, Oregon Laws 1997 of this Act, together with any other moneys made lawfully available from any source, are expected to be insufficient to reimburse the state for its payments of school districts' scheduled debt service payments or if it is necessary for the State Treasurer to expend state moneys or to borrow as provided in section 8, chapter 614, Oregon Laws 1997 of this Act, and amounts to be intercepted under section 7, chapter 614, Oregon Laws 1997 of this Act, together with any other moneys made lawfully available from any source, are expected to be insufficient to timely repay the state the moneys expended, or to timely pay the general obligation bonds issued or other borrowing undertaken under section 8, chapter 614, Oregon Laws 1997 of this Act, the State Treasurer shall certify to and give notice to the Director of the Oregon Department of Administrative Services of the amount of the deficiency.]

[(3) To the extent that other legally available revenues and funds of the state are sufficient to meet the certified deficiency, the property tax for this purpose is abated.]

SECTION 9. This 1999 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 1999 Act takes effect on its passage.

Approved by the Governor June 11, 1999

Filed in the office of Secretary of State June 11, 1999

Effective date June 11, 1999

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