|(a) Definitions. The following definitions apply to
the instructional facilities allotment (IFA) 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 regularly scheduled payments of principal and interest
that are made between September 1 and August 31 each year on general
obligation bonded debt or the underlying bonded debt applicable to
an eligible lease-purchase agreement as reported in the final official
statement (FOS) or in the bond order, if the bonds are privately placed,
to the state information depository. Debt service payments that are
not reported to the state information depository are not eligible
to receive IFA state assistance.
(5) Allotment--the amount of eligible debt service
that can be considered for state aid. The total allotment is made
up 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 (ADA), property values, and debt service.
(6) State information depository --the Municipal Advisory
Council of Texas (MAC).
(7) Sale date--the date of the award (i.e., the official
acceptance by the issuer of a bid or an offer to purchase a new issue
of municipal securities by an underwriter).
(b) Application process. A school district must complete
a separate application requesting funding under the IFA for each debt
issue or lease-purchase agreement proposed for funding. 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 and that are filed with the state information
depository, 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 a school
district that 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
agreement authorized by Local Government Code, §271.004.
(2) Application for funding of bonded debt service
must be received at the Texas Education Agency (TEA) before the sale
date of an issue.
(3) Application for funding of lease-purchase payments
must be received at the TEA before the passage of an order by the
school district board of trustees authorizing the lease-purchase agreement.
(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 refinancing or a combination
of refinancing and new debt, the refinanced 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). The method used
for the allocation of debt service between qualified and nonqualified
projects and between eligible and ineligible debt will be applied
to the debt service schedule resulting from a refinancing of IFA-supported
(7) An amended application packet is required for any
IFA-supported bonds or IFA-supported lease-purchase agreement that
has undergone changes, including, but not limited to, refinancing,
restatement, or any other transaction that materially affects the
terms of the bonds or the terms of the lease-purchase agreement, including
transactions that materially affect the terms of the underlying bonds.
Amended application packets must be submitted to the TEA no later
than 180 days following the date on which the transaction was approved
by the attorney general, if the transaction required approval by the
attorney general. If approval by the attorney general was not required,
the amended application packet is due within 180 days of the date
that the school board approved the transaction.
(8) Failure to submit the amended application packet
to the TEA division responsible for state funding within the 180-day
period defined in paragraph (7) of this subsection will result in
the suspension of IFA state aid payments for the applicable IFA allotment
award. This suspension has the following effects.
(A) Debt service payments associated with the applicable
IFA allotment will be disqualified for IFA state aid upon expiration
of the 180-day period defined in paragraph (7) of this subsection.
Debt service payments made after the 180-day period expires will not
earn IFA state aid.
(B) IFA state aid associated with the applicable allotment
will resume on the date the amended application packet, including
any required supporting documentation, is received. The IFA state
aid will be based on eligible debt service payments scheduled on or
after the date the amended application packet is received.
(C) Current and future IFA state aid payments may be
adjusted to reflect the disqualified debt service payments. If no
IFA state aid is due in a fiscal year that is affected by such an
adjustment, a district will be notified about the disqualified amount
and the provisions in TEC, §46.009(e), will apply.
(D) Unless otherwise requested, payments of IFA state
aid based on the updated eligible debt service reported in the completed
amended application packet shall be made with the payments due for
the following fiscal year in accordance with TEC, §46.009(d).
(9) In addition to the provisions in TEC, §46.007,
refunding bonds must also meet the following criteria.
(A) The refinancing of bonds must result in a present
value savings as defined by TEC, §46.007.
(i) Present value savings for fixed rate bonds shall
be computed at the true interest cost of the refinanced bonds.
(ii) In a refinancing of variable rate bonds with fixed
rate bonds, present value savings will be calculated based on:
(I) an assumed interest rate for the variable rate
bonds equal to the Municipal Market Data index (or other comparable
index) of "AAA" general obligation tax-exempt bonds for the month
in which the bonds were originally issued; and
(II) the rate, if any, used to determine the amount
deposited into a mandatory and irrevocable fund for the sole purpose
of defeasing the bonds in a variable rate mode.
(iii) In a refinancing of fixed rate bonds with variable
rate bonds, present value savings will be calculated based on an assumed
interest rate for the variable rate bonds equal to the ten-year average
of the Municipal Market Data index (or other comparable index) of
"AAA" general obligation tax-exempt bonds bearing interest in a variable
rate mode comparable to the variable rate mode in which the refinanced
bonds will be issued.
(iv) The district must certify the projected net present
value savings for refinancing described in clauses (i)-(iii) of this
subparagraph based on the parameters prescribed therein. The district
must submit the certification in a format prescribed by the commissioner.
(B) A conversion of the period, mode, or index used
to determine the interest rate for eligible debt in accordance with
the order authorizing the issuance or delivery of such eligible debt
shall not be considered a refunding of eligible debt, and a district
shall be eligible for state funding assistance based on the new debt
service schedule contingent upon receipt of the required amended application
packet as defined in paragraph (7) of this subsection.
(C) A district may refinance IFA-supported debt up
to two times after the issuance of the original IFA-supported debt.
Upon the third or subsequent refinancing transaction, the TEA may
evaluate the IFA-supported debt for conversion to the Existing Debt
Allotment (EDA) program. Determination of eligibility for conversion
will be based on the district's remaining capacity in the EDA program
and the district's other IFA-supported debt. The TEA will notify the
district of the conversion within 180 days of receiving notification
of the third or subsequent refinancing transaction involving an IFA-supported
(10) 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
agreement of the district or refinances an existing lease-purchase
agreement with another lease-purchase agreement, the transaction is
considered a refinancing of the lease-purchase agreement for purposes
of continued participation in the IFA program. Any transactions affecting
the lease-purchase agreement, including those that affect the underlying
bonds, are subject to the amendment requirements and eligibility criteria
specified in paragraphs (7)-(9) of this subsection, including the
restrictions related to early redemption and extension of maturity
dates, and the requirement for the refinancing transactions to produce
present value savings.
(B) A lease-purchase agreement in the IFA program that
is refinanced with a general obligation bond or another lease-purchase
agreement at a present value savings and without extension of the
original term of the lease-purchase agreement shall remain part of
the IFA program. Any transaction that reduces the term of the lease-purchase
agreement to less than eight years will result in the disqualification
of IFA state aid on debt service that is associated with the lease-purchase
agreement, beginning with the date that the transaction is approved
by the school district board of trustees.
(C) Any portion of a bond issue that refinances a portion
of a lease-purchase agreement that was originally ineligible for IFA
funding shall remain ineligible. Ineligible debt includes 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 agreement that was eligible for IFA
consideration but exceeded the IFA limit shall not be eligible for
consideration in future funding cycles.
(E) General obligation bonded debt that is used to
refinance a lease-purchase agreement that is not in the IFA program
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. For the refinancing to be considered for IFA funding, a district
must submit an application to the program that identifies the refinancing
as a new debt before the refinancing of the lease-purchase agreement.
(F) If any portion of a maturity of an IFA debt is
refinanced at a present value cost or with an extension of the term
beyond the fiscal year in which the final maturity occurs in the original
debt service schedule, the entire amount of annual debt service associated
with that maturity shall be removed from eligibility for further IFA