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(a)Statutory provision. The commissioner of education
must administer the open-enrollment charter school facilities credit
enhancement program according to the provisions of the Texas Education
Code (TEC), Chapter 45, Subchapter J.
(b)Definitions. The following definitions apply to
the open-enrollment charter school facilities credit enhancement program.
(1)Amortization expense--The annual expense of any
debt and/or loan obligations.
(2)Annual debt service--Payments of principal and
interest on outstanding bonded debt scheduled to occur between September
1 and August 31 during a fiscal year as reported by the Municipal
Advisory Council (MAC) of Texas or its successor, if the open-enrollment
charter holder is responsible for outstanding bonded indebtedness.
(A)The annual debt service will be determined by the
current report of the bonded indebtedness of the open-enrollment charter
holder as reported by the MAC of Texas or its successor as of the
date of the application deadline.
(B)The debt service amounts used in this calculation
for variable rate bonds will be those that are published in the final
official statement or final maturity schedule.
(C)Annual debt service includes required payments
into a sinking fund as authorized under the laws of Texas and the
United States of America, provided that the sinking fund is maintained
by a trustee or other entity approved by the commissioner that is
not under the control or common control of the charter holder.
(3)Application deadline--The last business day of
the month in which an application for a credit enhancement is filed.
Applications must be received by the Texas Education Agency (TEA)
division responsible for state funding by 5:00 p.m. on the last business
day of the month to be considered in that month's application processing.
(4)Average daily attendance (ADA)--Total refined average
daily attendance as defined by the TEC, §48.005.
(5)Board resolution--The resolution adopted by the
governing body of an open-enrollment charter holder that:
(A)requests credit enhancement of bonds through the
Open-Enrollment Charter School Bond Enhancement Program; and
(B)authorizes the charter holder's administration
to pursue bond financing.
(6)Bond resolution--The resolution authorizing the
issuance of bonds adopted by the governing body of an issuer of bonds
for the benefit of an open-enrollment charter holder.
(7)Combination issue--An issuance of bonds for which
an application is filed for a credit enhancement that includes both
a new money portion and a refunding portion, as permitted by the TEC,
Chapter 53, or the Texas Government Code, Chapter 1207. The eligibility
of combination issues for the credit enhancement is limited by the
eligibility of the new money and refunding portions as defined in
this subsection.
(8)Debt service coverage ratio--A measure of an open-enrollment
charter holder's ability to pay interest and principal with cash generated
from current operations. The debt service coverage ratio (total debt
service coverage on all long-term capital debt) equals the excess
of revenues over expenses plus interest expense plus depreciation
expense plus amortization expense, all divided by maximum annual debt
service. The calculation can be expressed as: (Excess of revenues
over expenses + interest expense + depreciation expense + amortization
expense) / Maximum annual debt service.
(9)Depreciation expense--The audited amount of depreciation
that was expensed during the fiscal period.
(10)Foundation School Program (FSP)--The program established
under the TEC, Chapters 46, 48, and 49, or any successor program of
state appropriated funding for school districts in the state of Texas.
(11)Maximum annual debt service--As of any date of
calculation, the highest annual debt service requirements with respect
to all outstanding debt for any succeeding fiscal year.
(12)New money issue--An issuance of revenue bonds
for the purposes of the purchase, repair, or renovation of real property,
including improvements to real property, for an educational facility,
as that term is defined in the TEC, §53.02, of an open-enrollment
charter school and for purposes of equipping real property of an open-enrollment
charter school. Eligibility for the credit enhancement for new money
issues is limited to the issuance of bonds authorized under the TEC,
Chapter 53. A new money issue does not include the issuance of bonds
to purchase a facility from a public facility corporation created
by the open-enrollment charter holder or to purchase any property
that is currently under a lease-purchase contract under the Local
Government Code, Chapter 271, Subchapter A.
(13)Open-enrollment charter--This term has the meaning
assigned in §100.1001 of this title (relating to Definitions).
(14)Open-enrollment charter holder--This term has
the meaning assigned to the term "charter holder" in the TEC, §12.1012.
(15)Open-enrollment charter school--This term has
the meaning assigned to the term "charter school" in §100.1001
of this title.
(16)Open-Enrollment Charter School Bond Enhancement
Program (CSBEP)--The program to provide credit enhancement for open-enrollment
charter school bonds that is described by this section and established
under the TEC, Chapter 45, Subchapter J.
(17)Open-enrollment charter school campus--This term
has the meaning assigned to the term "charter school campus" in §100.1001
of this title.
(18)Proposed annual debt service--Payments of principal
and interest on the outstanding bonded debt for which the enhancement
is sought scheduled to occur between September 1 and August 31 during
the fiscal year in which the credit enhancement is sought and each
fiscal year for which the credit enhancement is or would be in effect
as described in the amortization schedule for the bonded debt for
which the enhancement is sought. Proposed annual debt service includes
required payments into a sinking fund as authorized under the laws
of Texas and the United States of America, provided that the sinking
fund is maintained by a trustee or other entity approved by the commissioner
that is not under the control or common control of the charter holder.
(19)Refunding issue--An issuance of bonds for the
purpose of refunding bonds that have previously been issued under
the TEC, Chapter 53, or the Texas Government Code, Chapter 1207, and
have previously been approved by the Office of the Attorney General.
(20)School year--The period beginning the fourth Monday
of August of the current calendar year and ending the Sunday before
the fourth Monday of August of the following calendar year.
(c)Eligibility to apply for the credit enhancement.
(1)To have its application for the credit enhancement
considered, an open-enrollment charter holder must:
(A)have operated at least one open-enrollment charter
school in the state of Texas for at least three years;
(B)identify in its application for which open-enrollment
charter school and, if applicable, for which open-enrollment charter
school campus the bond funds will be used;
(C)in its application, agree that the bonded indebtedness
for which the credit enhancement is sought will be undertaken as an
obligation of all tax-exempt entities under common control of the
open-enrollment charter holder and agree that all such entities will
be liable for the obligation if the open-enrollment charter holder
defaults on the bonded indebtedness, provided that an entity that
does not operate a charter school in Texas is subject to this subparagraph
only to the extent that it has received state funds from the open-enrollment
charter holder;
(D)not be considered a high-risk grantee by the TEA
office responsible for planning, grants, and evaluation; and
(E)not have an unresolved corrective action that is
more than one year old, unless the open-enrollment charter holder
has taken appropriate steps to begin resolving the action.
(2)For an open-enrollment charter holder to have its
application for the credit enhancement considered, each open-enrollment
charter school operated under the charter must not have an accreditation
rating of Not Accredited-Revoked and must have a rating of acceptable
or higher as its most recent state academic accountability rating.
However, if an open-enrollment charter school operated under the charter
is not yet rated because the school is in its first year of operation,
that fact will not impact the charter holder's eligibility to apply
for the credit enhancement.
(d)Criteria to be met for open-enrollment charter
holder to receive initial approval.
(1)In determining whether an open-enrollment charter
holder applicant is eligible to receive initial approval for the credit
enhancement, the commissioner will investigate the financial status
of the applicant open-enrollment charter holder and the accreditation
status of all open-enrollment charter schools operated under the charter.
For the open-enrollment charter holder's application to be eligible
for initial approval by the commissioner, each open-enrollment charter
school operated under the charter must be accredited and the open-enrollment
charter holder must be financially sound. The commissioner's review
will include review of the following:
(A)the purpose of the bond issue;
(B)the accreditation status, as defined by §97.1055
of this title (relating to Accreditation Status), of all open-enrollment
charter schools operated under the charter in accordance with the
following, except that, if an open-enrollment charter school operated
under the charter has not yet received an accreditation rating because
it is in its first year of operation, that fact will not impact the
charter holder's eligibility for consideration for the credit enhancement:
(i)if the accreditation status of all open-enrollment
charter schools operated under the charter is Accredited, the open-enrollment
charter holder will be eligible for consideration for the credit enhancement;
(ii)if the accreditation status of any open-enrollment
charter school operated under the charter is Accredited-Warned or
Accredited-Probation, the commissioner will investigate the underlying
reason for the accreditation rating to determine whether the accreditation
rating is related to the open-enrollment charter school's financial
soundness. If the accreditation rating is related to the open-enrollment
charter school's financial soundness, the open-enrollment charter
holder will not be eligible for consideration for the credit enhancement;
or
(iii)if the accreditation status of any open-enrollment
charter school operated under the charter is Not Accredited-Revoked,
the open-enrollment charter holder will not be eligible for consideration
for the credit enhancement;
(C)the open-enrollment charter holder's financial
status and stability, regardless of each open-enrollment charter school's
accreditation rating, including approval of the bonds by the Office
of the Attorney General under the provisions of the TEC, §53.40;
(D)the audit history of the open-enrollment charter
holder and of all open-enrollment charter schools operated under the
charter;
(E)the open-enrollment charter holder's compliance
with statutes and rules of the TEA and with applicable state and federal
program requirements and the compliance of all open-enrollment charter
schools operated under the charter with these statutes, rules, and
requirements;
(F)any interventions and sanctions to which the open-enrollment
charter holder has been subject; to which any of the open-enrollment
charter schools operated under the charter has been subject; and,
if applicable, to which any of the open-enrollment charter school
campuses operated under the charter has been subject;
(G)formal complaints made against the open-enrollment
charter holder, against any of the open-enrollment charter schools
operated under the charter, or against any of the open-enrollment
charter school campuses operated under the charter;
(H)the state academic accountability rating of all
open-enrollment charter schools operated under the charter and the
campus ratings of all open-enrollment charter school campuses operated
under the charter; and
(I)any unresolved corrective actions that are less
than one year old.
(2)For an open-enrollment charter holder to receive
initial approval for credit enhancement:
(A)the applicant open-enrollment charter holder's
lowest credit rating from any credit rating agency may not be the
same as or higher than that of the CSBEP;
(B)the bonded debt for which the credit enhancement
is sought must be structured so that no single annual debt service
payment exceeds two times the quotient produced by dividing the total
proposed annual debt service, as defined in subsection (b)(18) of
this section, for the term of the bonds by the number of years in
the amortization schedule; and
(C)the open-enrollment charter holder must agree,
in its application, that payments of all of the principal of the bonds
will be scheduled during the first six months of the state fiscal
year.
(3)To receive initial approval for credit enhancement
of bonds to be issued for the purchase, repair, or renovation of real
property, the open-enrollment charter holder must agree, in its application,
to execute a lien or require the owner of the property, if different,
to execute a lien on that real property in a form prescribed by the
commissioner and approved by the Office of the Attorney General to
secure repayment of all amounts due to the state from the open-enrollment
charter holder, including reimbursement of any private funds paid
on behalf of an open-enrollment charter school under this section.
The lien must be filed in the real property records of each county
in which the real property is located. In accordance with the TEC, §45.306,
the lien has priority over any other claim against the real property
except a lien granted to the holders of obligations issued to finance
the acquisition of the real property and any security interest or
lien existing before credit enhancement is provided under this section.
The open-enrollment charter holder must disclose all existing liens,
security interests, or other encumbrances on the real property to
be purchased, renovated, or improved and on any improvements proposed
for the real property in the application and confirm that no additional
liens or encumbrances have been placed on the property before the
signing and filing of the lien under this subsection. On the payment
or defeasance of the enhanced bonds, the lien will terminate and be
released insofar as the paid or defeased bonds are concerned. Property
purchased with the bond proceeds is presumed to be public property
under the TEC, §12.128, and remains public property in accordance
with that section.
(e)Limitations on access to the credit enhancement.
(1)The commissioner will limit approval of the credit
enhancement to an open-enrollment charter holder with a historical
debt service coverage ratio of at least 1.1 and a projected debt service
coverage ratio of at least 1.20.
(2)The eligibility of bonds to receive the credit
enhancement is limited to those new money, refunding, and combination
issues as defined in subsection (b)(12), (19), and (7), respectively,
of this section.
(3)To be eligible to receive the credit enhancement,
bonds may not provide for acceleration of amounts of principal or
interest not yet matured by virtue of a charter holder's failure to
make payments or for any other reason.
(f)Application processing. To facilitate prioritization
of applications for the credit enhancement, all applications received
during a calendar month will be held until the twentieth business
day of the subsequent month. On the twentieth business day of each
month, the commissioner will announce the results of the prioritization
described in paragraph (6) of this subsection, if prioritization was
necessary, and process applications for initial approval of the credit
enhancement up to the available capacity as of the application deadline,
subject to the requirements of this subsection.
(1)The open-enrollment charter holder may not submit
an application for a credit enhancement before the governing body
of the open-enrollment charter holder adopts a board resolution as
defined in subsection (b)(5) of this section.
(2)The actual credit enhancement of the bonds is subject
to the initial approval process and the final approval process prescribed
in subsection (g) of this section.
(3)Refunding issues must comply with the following
requirements to retain eligibility for the credit enhancement for
the refunding bonds.
(A)The open-enrollment charter holder must demonstrate
that issuing the refunding bond(s) will result in a net present value
savings to the open-enrollment charter holder and that the refunding
bond or bonds will not have a maturity date later than the final maturity
date of the bonds being refunded. Net present value savings 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. Net present value savings must be computed
at the true interest cost of the refunding bonds.
Cont'd...
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