| (C) Application for credit enhancement of refunding
issue. The commissioner will consider an application for the credit
enhancement of a refunding issue that meets all applicable requirements
specified in this section even if the applicant school district has
declared a state of financial exigency for the district's current
fiscal year. In addition to fulfilling all applicable requirements
specified in this section, the applicant school district must also
describe, in its application, the reason financial exigency was declared
and how the refunding issue will support the district's financial
recovery plan.
(2) Declaration in a previous fiscal year. An applicant
school district that declared a state of financial exigency in a previous
district fiscal year but that has not declared such a state for the
district's current fiscal year will not be considered to be in a state
of financial exigency for the purposes of this section.
(i) Defeasance. The credit enhancement will be completely
removed when bonds provided credit enhancement under this section
are defeased, and such a provision must be specifically stated in
the bond resolution. If bonds provided credit enhancement under this
section are defeased, the district must notify the commissioner in
writing within ten calendar days of the action.
(j) Payments. For purposes of the provisions of the
TEC, Chapter 45, Subchapter I, matured principal and interest payments
are limited to amounts due on bonds provided credit enhancement under
this section at scheduled maturity, at scheduled interest payment
dates, and at dates when bonds are subject to mandatory redemption,
including extraordinary mandatory redemption, in accordance with their
terms. All such payment dates, including mandatory redemption dates,
must be specified in the order or other document pursuant to which
the bonds initially are issued. Without limiting the provisions of
this subsection, payments attributable to an optional redemption or
a right granted to a bondholder to demand payment upon a tender of
such bonds in accordance with the terms of the bonds do not constitute
matured principal and interest payments.
(k) Credit enhancement restrictions. The credit enhancement
provided for eligible bonds in accordance with the provisions of the
TEC, Chapter 45, Subchapter I, is restricted to matured bond principal
and interest. The credit enhancement does not extend to any obligation
of a district under any agreement with a third party relating to bonds
that is defined or described in state law as a "bond enhancement agreement"
or a "credit agreement," unless the right to payment of such third
party is directly as a result of such third party being a bondholder.
(l) Notice of failure or inability to pay. A school
district that has determined that it is or will be unable to pay maturing
or matured principal or interest on a bond for which credit enhancement
is provided under this section must immediately, but not later than
the tenth business day before maturity date, notify the commissioner.
(m) Payment from intercepted funds.
(1) Immediately after the commissioner receives the
notice described in subsection (l) of this section, the commissioner
will instruct the comptroller to transfer to the district's paying
agent from the amount of funds available to make payments under the
SDBEP from the FSP, as identified by the commissioner, the amount
necessary to pay the maturing or matured principal or interest.
(2) Immediately after receipt of the funds for payment
of the principal or interest, the paying agent must pay the amount
due.
(3) The procedures described in paragraphs (1) and
(2) of this subsection apply to each payment of principal or interest
on bonds as the payment becomes due until the bonds mature or are
defeased according to state law.
(4) If, as a result of payments made under this subsection,
there is insufficient money to fully fund the FSP, the commissioner
will, to the extent necessary, reduce each school district's foundation
school fund allocations, other than any portion appropriated from
the ASF, in the same manner provided by the TEC, §48.266(f),
for a case in which school district entitlements exceed the amount
appropriated. The following fiscal year, the commissioner will increase
each school district's entitlement under the TEC, §48.266, by
an amount equal to the reduction under this paragraph.
(5) A payment made under this subsection by the state
on behalf of a school district of funds the district owes on bonds
for which credit enhancement is provided under this section creates
a repayment obligation of the district to the state regardless of
the maturity date of, or any payment of interest on, the bonds.
(6) This subsection does not create a debt of the state
under the Texas Constitution or, except to the extent provided by
this section, create a payment obligation.
(n) Bonds not accelerated on failure to pay. If a school
district fails to pay principal or interest on a bond for which credit
enhancement is provided under this section when the amount matures,
other amounts not yet mature are not accelerated and do not become
due by virtue of the district's failure to pay amounts matured.
(o) Reimbursement of FSP. If payment from the money
appropriated to the FSP is made on behalf of a school district, the
school district must reimburse the amount of the payment in accordance
with the requirements of the TEC, §45.261.
(p) Repeated failure to pay. If a total of two or more
payments are made under the guarantee program authorized under §33.65
of this title or the SDBEP on the bonds of a school district, the
commissioner will take action in accordance with the provisions of
the TEC, §45.262.
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