45th legislature - STATE OF NEW MEXICO - first session, 2001

RELATING TO PUBLIC SCHOOLS; AMENDING THE SCHOOL REVENUE BOND ACT; DECLARING AN EMERGENCY.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 22-19-1 NMSA 1978 (being Laws 1967, Chapter 16, Section 240) is amended to read:

"22-19-1. SHORT TITLE.--[Sections 77-16-1 through 77-16-16 New Mexico Statutes Annotated, 1953 Compilation] Chapter 22, Article 19 NMSA 1978 may be cited as the "School Revenue Bond Act"."

Section 2. Section 22-19-2 NMSA 1978 (being Laws 1967, Chapter 16, Section 241) is amended to read:

"22-19-2. DEFINITIONS.--As used in the School Revenue Bond Act:

A. "additional income" means net income from an existing building, improvement or other facility;

B. "federal grants" means grants, subsidies or contributions from the United States or any of its agencies or instrumentalities;

[A.] C.  "income project" means purchasing, erecting, improving, repairing or furnishing a building, improvement or facility, including housing for teachers, and including the land upon which it is situated, [which] that will produce an income to the school district;

[B.] D.  "net income from the income project" means all income derived from an income project, including the income pledged pursuant to the School Revenue Bond Act, less the operating costs of the income project; [and

C.] E. "operating costs" means expenses of operating, maintaining and keeping in repair an income project, including the cost of heating, electricity, insurance, service employees and equipment replacement; and

F. "pledgeable revenue" means all or a portion of net income from the income project, additional income and federal grants or any combination of those."

Section 3. Section 22-19-4 NMSA 1978 (being Laws 1967, Chapter 16, Section 243) is amended to read:

"22-19-4. BONDS [MORTGAGES].--

A. A local school board may issue bonds or other special obligations to finance [the repayment of all money borrowed for an income project] one or more income projects pursuant to the School Revenue Bond Act and irrevocably pledge all or any combination of the pledgeable revenues to the repayment thereof including funding of any debt service reserve fund.

B. [A local school board may execute a mortgage, deed of trust or a security agreement upon the income project to secure payment of any bonds or other special obligations issued pursuant to the School Revenue Bond Act.] Such bonds or other special obligations shall be payable solely from the pledgeable revenues pledged to the payment of the obligation and shall not constitute an indebtedness, debt or general obligation of the school district, the state or any agency, instrumentality or political subdivision of the state."

Section 4. Section 22-19-5 NMSA 1978 (being Laws 1967, Chapter 16, Section 244) is amended to read:

"22-19-5. DETERMINATION BY LOCAL SCHOOL BOARD.--Prior to borrowing money and issuing evidences of indebtedness to finance an income project, a local school board shall make a determination that the income project is necessary and that [sufficient income will be produced by the income project] the pledgeable revenues pledged to the repayment of the bonds or other special obligations are reasonably expected to be sufficient to repay all money borrowed and to discharge any bonds or other special obligations issued for [the repayment of the money borrowed] such income project or projects; provided that such expectations may assume that any federal grants will be available over the life of such bonds or other special obligations even if such federal grants are subject to annual appropriation."

Section 5. Section 22-19-6 NMSA 1978 (being Laws 1967, Chapter 16, Section 245) is amended to read:

"22-19-6. REPORT TO STATE BOARD.--Prior to borrowing any money to finance an income project, a local school board shall furnish to the state board the following information:

A. a detailed description of the income project;

B. an explanation of the necessity for the income project;

C. an estimate of the total cost of the income project;

D. an estimate of the amount of income anticipated from the income project, additional income and any applicable federal grants that may be pledged to the payment of the bonds or other special obligations;

E. an estimate of the amount of income from existing buildings, improvements or facilities that will be pledged to pay for the income project;

F. an estimate of the yearly operating cost of the income project; and

G. an estimate of the anticipated yearly net income from the income project, additional income and any applicable federal grants that may be pledged to the payment of the bonds or other special obligations."

Section 6. Section 22-19-7 NMSA 1978 (being Laws 1967, Chapter 16, Section 246) is amended to read:

"22-19-7. STATE BOARD APPROVAL--DETERMINATION BY STATE BOARD.--

A. A local school board shall obtain written approval of the state board before it borrows money, issues bonds or other special obligations [or executes mortgages, deeds of trust or security agreements] for financing an income project pursuant to the School Revenue Bond Act.

B. Prior to giving written approval to an income project, the state board shall determine that the income project is necessary and that sufficient income will be produced by the [income project] pledgeable revenues pledged to repay all money borrowed and to discharge any bonds or other special obligations issued for the repayment of the money borrowed; provided that in making such determination, the state board may assume that any federal grants will be available over the life of the bonds or other special obligations even if the federal grants are subject to annual appropriation."

Section 7. Section 22-19-8 NMSA 1978 (being Laws 1967, Chapter 16, Section 247) is amended to read:

"22-19-8. RECORDS--RESTRICTION ON USE OF INCOME.--

A. A local school board shall retain complete and accurate records of:

(1) the net income from the income project; [and]

(2) the operating costs of the income project; and

(3) all other pledgeable revenues pledged to such bonds or other special obligations.

B. If net income from the income project is pledged to the bonds or other special obligations, all income from the income project shall be used solely for the following purposes:

(1) to pay the principal, interest and service charges on any bonds or other special obligations issued pursuant to the School Revenue Bond Act, including the funding of any debt service reserve fund; and

(2) to pay the operating costs of the income project."

Section 8. Section 22-19-9 NMSA 1978 (being Laws 1967, Chapter 16, Section 248) is amended to read:

"22-19-9. BONDS--PLEDGE OF INCOME--SATISFACTION OF [INDEBTEDNESS] OBLIGATIONS.--

A. Bonds or other special obligations issued pursuant to the School Revenue Bond Act shall be payable solely from, and the local school board shall irrevocably pledge, for the prompt payment of the principal, interest and service charges thereof, [the net income from the income project for which the bonds or other special obligations were issued] all or any combination of the pledgeable revenues. The bonds or other special obligations shall be equally and ratably secured, without priority, by this pledge of the [net income from the income project] pledgeable revenues pledged.

B. If the bonds or other special obligations are payable solely from the income project being financed, a local school board shall operate the income project so as to insure a sufficient income to promptly pay the principal, interest and service charges as they become due on the bonds or other special obligations issued after the payment of operating costs of the income project. [A local school board shall establish a reserve fund not exceeding ten thousand dollars ($10,000) to be used for the repayment of any money borrowed.

C. Satisfaction of any indebtedness created by any bonds or other special obligations issued pursuant to the School Revenue Bond Act shall be limited solely to foreclosure of the income project upon which a mortgage, deed of trust or security agreement was executed, without the right to a deficiency judgement.]"

Section 9. Section 22-19-10 NMSA 1978 (being Laws 1967, Chapter 16, Section 249) is amended to read:

"22-19-10. PROCEEDS OF BOND SALES--RETIREMENT FUND.--

A. Proceeds from the sale of bonds or other special obligations issued by a local school board pursuant to the School Revenue Bond Act shall be deposited into [a] one or more separate [account] accounts to be used solely for the specific purposes for which the money was borrowed and may be deposited into a debt service reserve fund that may be established by the local school board. All costs incident to issuing and selling bonds or other special obligations may be paid out of the proceeds of [this account] these accounts.

B. A local school board at the time of issuing any bonds or other special obligations shall establish a fund or account to be known as the "retirement fund" for the payment of the principal of and interest on bonds or other special obligations and may establish a debt service reserve fund for their payment and sufficient amounts from the pledgeable revenues pledged to payment of the principal and interest shall be deposited in or credited to the retirement fund at least annually so that timely payments of the principal and interest may be made. All [net income from the income project and all] proceeds remaining after completion of the income project shall be deposited into the retirement fund, the reserve fund or any combination of those. All proceeds in the retirement fund shall be used solely for the purpose of repaying the principal, interest and service charges on any bonds or other special obligations issued for the income project."

Section 10. Section 22-19-11 NMSA 1978 (being Laws 1967, Chapter 16, Section 250) is amended to read:

"22-19-11. BONDS--FORM--REQUIREMENTS.--All bonds or other special obligations issued pursuant to the School Revenue Bond Act shall:

A. be fully negotiable within the provisions of the Uniform Commercial Code;

B. have a duration of time not to exceed forty years from their date of issuance;

C. bear interest at a rate [not to exceed a net of six percent a year, interest] payable annually or semiannually;

D. be sold at a price [which does not result in an actual net interest cost to maturity, computed on the basis of standard tables of bond values, in excess of six percent a year] that results in a net effective interest rate that does not exceed the maximum net effective interest rate permitted by the Public Securities Act;

E. have the principal thereof paid in yearly amounts beginning not later than two years from their date of issuance; and

F. be sold at public or private sale [with or without a discount, as provided by Subsection D of this section] at, above or below par as permitted by and subject to the provisions of the Public Securities Act."

Section 11. Section 22-19-12 NMSA 1978 (being Laws 1967, Chapter 16, Section 251) is amended to read:

"22-19-12. PLEDGE OF ADDITIONAL REVENUE.--A local school board may pledge as security for the payment of the principal and interest on any bonds or other special obligations issued pursuant to the School Revenue Bond Act a part or the whole amount of the net income derived from an existing building, improvement or other facility subject to the control of the local school board. A local school board may pledge this net income whether or not the existing building, improvement or facility is to be improved, repaired or furnished by the proceeds of the bonds or other special obligations."

Section 12. Section 22-19-13 NMSA 1978 (being Laws 1967, Chapter 16, Section 252) is amended to read:

"22-19-13. REFUNDING BONDS.--

A. A local school board may issue refunding bonds for the purpose of refunding [for not less than the principal amount thereof] bonds issued pursuant to the provisions of the School Revenue Bond Act or any act repealed [thereby] by that act or for the purpose of providing additional funds for any income project [for which bonds have been] authorized by a local school board, or for both purposes.

B. Except as otherwise provided in the School Revenue Bond Act, refunding bonds shall conform to the provisions of the School Revenue Bond Act which provide for the issuance of other revenue bonds by a local school board.

C. A refunding bond issued by a local school board may have the same security or source of payment as was pledged for the payment of the bond being refunded or all or any combination of the pledgeable revenues, but no source of payment shall be pledged which is not authorized by the School Revenue Bond Act.

D. A refunding bond may be delivered in exchange for a bond authorized to be refunded, sold at a public or private sale [for not less than the par value of the bond] at, above or below par as provided by the Public Securities Act or sold in part and exchanged in part. If the refunding bond is sold, the proceeds shall be immediately applied to the retirement of the bond to be refunded, or the proceeds or the obligations in which the proceeds are permitted by law to be invested shall be placed in trust to be held and applied to payment of the bond to be refunded."

Section 13. Section 22-19-14 NMSA 1978 (being Laws 1967, Chapter 16, Section 253) is amended to read:

"22-19-14. REFUNDING BONDS--ISSUANCE--SALE--PROCEEDS.--

A. No bond shall be refunded pursuant to the School Revenue Bond Act unless it matures or is callable for prior redemption under its terms within fifteen years from the date of issuance of the refunding bond or unless the holder of the bond voluntarily surrenders it for exchange or payment.

B. Outstanding bonds of more than one issue may be refunded by refunding bonds of one or more issue. Refunding bonds and any other bonds authorized pursuant to the School Revenue Bond Act may be issued separately or in combinations of one or more series.

C. If any officer whose signature or facsimile signature appears on any bond or coupon authorized by the School Revenue Bond Act ceases to hold office before delivery of the bond, the signature or facsimile signature shall be valid for all purposes as if he had remained in office until delivery; provided, however, it is recognized that such bonds may be issued in any form permitted by the Supplemental Public Securities Act that applies to the School Revenue Bond Act.

D. When a refunding bond is sold, the net proceeds may, in the discretion of the local school board, be invested in obligations of the federal government or any agency of the federal government or in obligations fully guaranteed by the federal government, but the obligations purchased [must] shall have a maturity and bear a rate of interest payable at times to ensure the existence of sufficient money to pay the bond to be refunded when it becomes due or redeemable pursuant to a call for redemption, together with interest and redemption premiums, if any.

E. All obligations purchased with the net proceeds from refunding bonds shall be deposited in trust with a bank [doing business in] that is located within or without the state that has and is exercising trust powers and [which] that is a member of the federal deposit insurance corporation. The obligations shall be held, liquidated and the proceeds of the liquidation paid out for payment of the principal, interest and redemption premium of the bonds to be refunded as the bonds to be refunded become due or where the bonds are subject to redemption under a call for redemption previously made or where there is a voluntary surrender with the approval of the local school board.

F. The determination of the local school board issuing refunding bonds that the issuance has been in compliance with the School Revenue Bond Act is conclusively presumed correct in the absence of fraud or arbitrary and gross abuse of discretion.

G. As used in the section, "net proceeds" means the gross proceeds of the refunding bonds after deducting all accrued interest and expenses incurred in connection with the authorization and issuance of the refunding bonds and the refunding of outstanding bonds, including fiscal agent fees, commissions and all discounts incurred in the resale of the refunding bonds to the original purchaser.

H. As used in this section and Section 22-19-13 NMSA 1978, "bond" means a bond or other special obligation."

Section 14. SEVERABILITY.--if any part or application of this act is held invalid, the remainder or its application to other situations or persons shall be not affected.

Section 15. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.