45th legislature - STATE OF NEW MEXICO - second session, 2002
RELATING TO PUBLIC SCHOOL FINANCE; ALLOWING FEDERAL FUNDS TO BE PLEDGED FOR SCHOOL REVENUE BONDS EVEN IF SUBJECT TO ANNUAL APPROPRIATION; ALLOWING OTHER REVENUE TO BE PLEDGED; ALLOWING INCOME FROM FUTURE INCOME PROJECTS TO BE PLEDGED; PROVIDING FOR DEBT SERVICE RESERVE FUNDS; INCREASING THE NET EFFECTIVE INTEREST RATE ALLOWED ON SCHOOL REVENUE BONDS.
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. "bonds" means revenue bonds;
B. "federal grant" means a payment, grant, subsidy, contribution or other money from the United States or any of its agencies or instrumentalities that is not otherwise restricted as to use and that the federal government allows to be pledged or used to pay debt service on bonds;
[A.] C. "income project" means [purchasing,
erecting, improving, repairing or furnishing a building,
improvement or facility including the land upon which it is
situated which will produce] a facility that produces an
income to the school district, including housing for teachers
and including the land upon which the income project is
situated and improvements to that land;
[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]
utilities, insurance, service employees and equipment
replacement; and
F. "pledgeable revenue" means net income from the income project and other revenue of the school district, including net income from other existing and future income projects and federal grants, but not including revenue from the state, property taxes or other bond issues."
Section 3. Section 22-19-4 NMSA 1978 (being Laws 1967, Chapter 16, Section 243) is amended to read:
"22-19-4. BONDS [MORTGAGES] NOT GENERAL OBLIGATIONS OF
SCHOOL DISTRICT OR STATE.--
A. A local school board may issue bonds [or other
special obligations] to finance [the repayment of all money
borrowed for] the purchase, construction, renovation,
equipping or furnishing of an income project [pursuant to the
School Revenue Bond Act.
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] and may
irrevocably pledge any or all pledgeable revenue to the
payment of those bonds and to the debt service reserve fund if
one is established for the bonds.
B. Bonds shall be payable solely from pledgeable revenue and shall not constitute an indebtedness or general obligation of the school district, the state or other political subdivisions 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--FEDERAL GRANTS.--
A. Prior to [borrowing money and] issuing
[evidences of indebtedness] bonds to finance the purchase,
construction, renovation, equipping or furnishing of 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] estimated pledgeable
revenue pledged to the bonds is sufficient to repay [all money
borrowed and to discharge any] the bonds [or other special
obligations issued for the repayment of the money borrowed].
B. Revenue from federal grants may be pledged even if the federal grants are subject to annual appropriation. Federal grants shall not be pledged unless such use is allowed by federal law. The local school board shall include in its determination a statement as to the legality of pledging the federal grants and what other revenue will be available to make bond payments if federal grants are not appropriated."
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] issuing bonds 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;
E.] D. an estimate of [the amount of income from
existing buildings, improvements or facilities] the net income
of the income project and other revenues that will be pledged
to pay for the income project; and
[F.] E. 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]."
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] to
finance 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 to repay all money borrowed and
to discharge any bonds or other special obligations issued for
the repayment of the money borrowed] estimated pledgeable
revenue pledged to the bonds is sufficient to repay the
bonds."
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) receipt and amount of other pledgeable revenue that is pledged or may be pledged to the repayment of the bonds; and
[(2)] (3) the operating costs of the income
project.
B. [All income from the income project] Pledgeable
revenue that is pledged to the repayment of bonds shall first
be used [solely for the following purposes: (1)] to pay the
principal, interest and service charges on [any] the bonds [or
other special obligations issued pursuant to the School
Revenue Bond Act; and (2) to pay the operating costs of the
income project] and to fund a debt service reserve fund, if
applicable."
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].--
A. Bonds [or other special obligations issued
pursuant to the School Revenue Bond Act] shall be payable
solely from any or all pledgeable revenue, and the local
school board shall irrevocably pledge [for] that revenue to
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] on
the bonds. 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] of pledgeable
revenue.
B. [A] If the bonds are payable solely from the
net income of the income project being financed, the local
school board shall operate the income project so as to
[insure] ensure 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--RESERVE 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
separate account to be used solely for the specific purposes
for which the [money was borrowed] bonds were issued,
including a debt service reserve fund. All costs incident to
issuing and selling the bonds [or other special obligations]
may be paid out of the proceeds of [this account] the bonds.
B. [A] The local school board [at the time of
issuing any bonds or other special obligations] shall
establish a [fund to be known as the] bond "retirement fund"
[All net income from the income project and] to be used solely
for the payment of principal, interest and service charges on
the bonds. Sufficient amounts from the pledged revenue shall
be deposited in the retirement fund at least annually so that
timely payments of principal and interest may be made. All
proceeds remaining after completion of the income project
shall be deposited into the retirement fund. [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.]
C. The local school board may establish a "debt service reserve fund" to be used to pay bond payments in case the pledged revenue is insufficient."
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] or rates payable annually or
semiannually;
D. be sold at a price [which] that does not result
in [an actual] a net effective interest [cost to maturity,
computed on the basis of standard tables of bond values, in
excess of six percent a year] rate in excess of twelve percent
a year;
E. have the principal [thereof] of the bonds 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."
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] the bonds [or other special obligations
issued pursuant to the School Revenue Bond Act] a part or the
whole amount of net income derived from an existing [building,
improvement or other facility] or future income project
subject to the control of the local school board. A local
school board may pledge this income whether or not the
existing [building, improvement or facility] or future income
project 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] to refund bonds [issued pursuant to the
provisions of the School Revenue Bond Act or any act repealed
thereby 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] that 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, but no source of
payment shall be pledged [which] that 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] or
sold in part and exchanged in part as provided in the Public
Securities Act. 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] A bond shall not 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. Bonds and 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] an officer whose signature or
facsimile signature appears on [any] a 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.
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] an 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 the state and which] that has trust powers
and 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 this 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."
Section 14. REPEAL.--Section 22-19-3 NMSA 1978 (being Laws 1967, Chapter 16, Section 242) is repealed.