Current through Register Vol. 50, No. 9, September 20, 2024
A. The Omnibus Bond Authorization Act, in
order to facilitate the funding of capital improvements by certain governmental
units and political subdivisions of the state, has authorized the issuance of
general obligation bonds contingent upon the applicable management board,
governing body, or state agency entering into and executing a reimbursement
contract with the Bond Commission pertaining to the reimbursement payments and
reimbursement reserve account payments for such projects.
B. The execution of such reimbursement
contracts does not in any way affect, restrict, or limit the pledge of the full
faith and credit of the state of Louisiana to the payment of the general
obligation bonds issued pursuant to the authority of such act.
C. The state of Louisiana is obligated to the
general obligation bondholder regardless of the existence of any reimbursement
contracts between the state and any of its governmental units or political
subdivisions, and likewise the governmental unit or political subdivision is
obligated to make payment to the state of the money loaned under the
reimbursement contracts, regardless of the current status of any general
obligation bonds.
D. In some
instances the prepayment of such reimbursement contracts can result in savings
and/or other benefits to such governmental units and political subdivisions,
and to that end a clear and orderly process for entering into and prepaying
reimbursement contracts will benefit both the state and the governmental units
and political subdivisions utilizing such tax-exempt funds by insuring that
funds are handled in such a manner as to maintain the tax-exempt status of any
bonds issued in connection with the transaction. Therefore, the following is
the policy of the Department of the Treasury, Bond Commission, to be considered
relative to reimbursement contracts.
1. Any
governmental entity or political subdivision borrowing money from the proceeds
of a state general obligation bond issue shall, at the time the money is
borrowed from the state, enter into a reimbursement contract as provided in the
Omnibus Bond Authorization Act pursuant to which the bonds were issued, which
reimbursement contract shall provide for the terms and conditions under which
these funds shall be repaid by the governmental entity or political
subdivision. At the time a reimbursement contract is executed for the
underlying tax-exempt obligation, an IRS Form 8038G or Form 8038GC shall be
prepared by the attorney general and shall be executed by the recipient of the
bond proceeds.
2. Any governmental
unit or political subdivision which has entered into a reimbursement contract
shall be allowed to prepay the reimbursement contract:
a. if the prepayment would result in a
minimum net present value savings in accordance with Schedule A
hereto;
b. if economic and
administrative benefits accrue to the governmental unit or political
subdivision as a result of the prepayment as may be reasonably determined by
the staff of the Bond Commission; or
c. a prepayment characterized as a current
refunding shall be permitted in any case.
3. A governmental unit or political
subdivision wishing to prepay a reimbursement contract shall make such request
in writing to the Bond Commission. The staff shall determine the amount due for
prepayment, including principal and interest due less the amount of any
reimbursement reserves. No redemption premium shall be charged to prepay a
reimbursement contract unless such premium is needed to pay a corresponding
redemption premium to the state's bondholders within 90 days of such
prepayment.
4. The staff of the
Bond Commission shall then send written notification to the chief financial
officer or other appropriate official for the entity requesting prepayment
setting forth the amount owed for prepayment. Copies of the notice shall be
forwarded to the fiscal officer of the Department of the Treasury, the attorney
general, and the Division of Administration. The chief financial officer or
other official to whom the notice is sent shall verify in writing that they
concur with the figures submitted in the written notice.
5. If application is made to the Bond
Commission for the issuance of refunding bonds, the proceeds of which are to be
used for the prepayment of a reimbursement contract, a copy of the notification
submitted pursuant to Subsection 4 above must be attached to the application.
Upon receipt of such an application, the state debt analyst shall be
immediately notified. The total amount due in order to prepay the reimbursement
contract must be verified by the state debt analyst and made a part of the
file. Once the amounts have been verified the usual procedure for approval of
bond applications shall be followed.
6. After the recipient's refunding bonds have
been sold, the applicant must contact the Bond Commission to arrange payment of
the reimbursement contract. Prepayments must be accompanied by a certificate of
the chief financial officer or bond counsel for the prepaying entity attesting
to the correct arbitrage yield on the refunding bonds.
7. Upon delivery of the prepayment check, the
state debt analyst shall fill out the parish and local government Reimbursement
Contract Prepayment Receipt Log showing receipt of the money, where it is to be
deposited and whether it is to be yield restricted to the rate of arbitrage
yield certified to by the bond counsel for the prepaying entity (in the case of
prepayments funded by a tax-exempt bond issue) or to the rate of the state bond
issue (in the case of prepayments not funded with the proceeds of a tax-exempt
bond issue, such as those funded from tax revenues or user fees). The proceeds
received as prepayment of reimbursement contracts shall be deposited by the
fiscal office, Department of the Treasury, into the state treasury in
accordance with the designation shown on the form and shall be placed in the
Capital Outlay Escrow Fund. Such funds shall be yield restricted as indicated
above or yield reduction payments shall be made as necessary until such funds
are expended in accordance with law. All interest earnings on such funds shall
remain in the Capital Outlay Escrow Fund and shall be restricted to the same
yield as the original prepayment deposit or yield reduction payments shall be
made as necessary until all such earnings are expended along with the principal
prepayment amount.
8. Upon deposit
of the prepayment proceeds, the Fiscal Control Section of the Department of the
Treasury shall notify the Division of Administration that funds are now
available to be used in accordance with the Capital Outlay Bill for the current
fiscal year. Such notification shall include a copy of the Reimbursement
Prepayment Receipt Form.
9. The
Division of Administration shall notify the fiscal control section of the
Department of Treasury when these funds have been allocated to a particular
project. Such notification shall include the name of the project and the amount
allocated.
a. Appropriate Threshold of Savings
|
THE APPROPRIATE THRESHOLD OF SAVINGS THAT SHOULD
EXIST FOR AN ECONOMIC ADVANCE REFUNDING
|
|
Months to Call
|
Minimum Present Value Savings to Refund
|
|
0-12
|
Net Present Value Savings >
|
0 percent
|
|
13-24
|
Net Present Value Savings >
|
1.5 percent
|
|
25-48
|
Net Present Value Savings >
|
3.0 percent
|
|
>48
|
Net Present Value Savings >
|
5.0 percent
|
b.
Prepayment of Reimbursement Contracts
CHECKLIST FOR COMPLIANCE WITH POLICY AND PROCEDURES FOR
PREPAYMENT OF REIMBURSEMENT CONTRACTS
1. Name of
entity________________________________
2. Identifying information on reimbursement
contract
Name __________________________________________
Series ________________________ Issue Date
___________________
Amount Of Original Issue __________________________
Principal and Interest Payment Dates: P ______ I
______
3. IRS Form 8038G or
8038GC executed? Yes___ No___
4.
Net present value savings _______________________
5. Date request for prepayment approval
received ______
6. Forwarded to
State Debt Analyst II (date) __________
7. Cost of prepayment:
a
Principal $
b.
Interest $
c. Redemption premium,
if any $
d. Less Reserves
$
e. Total amount due for
prepayment $
8. Request
for verification forwarded to chief financial
officer_____________________________________________
(Copies to Division of Administration; Attorney General;
fiscal control section)
9.
Verification received from chief financial officer _____
10. Prepayment received on (date)
___________________
11. Arbitrage
yield certificate: Yes _________No ________
12. Reimbursement Prepayment Receipt Form
completed
________________________________________________
13. Funds deposited into Capital
Outlay Escrow Account on
________________________________________________
14. Yield restricted to rate of
________________________
15.
Division of Administration notified of deposit on _____
c. Bond Proceeds Being Used for Prepayment of
Reimbursement Contracts
CHECKLIST FOR BOND APPLICATIONS WHEN BOND PROCEEDS ARE TO BE
USED FOR PREPAYMENT OF REIMBURSEMENT CONTRACTS
1. Name of entity
____________________________________________________
2. Identifying information on reimbursement
contract to be prepaid with bond proceeds
Name
Series ________________________ Issue Date
_____________________
Amount of Original Issue
__________________________________________
Principal and Interest Payment Dates: P __ I____________
3. State Debt Analyst
notified of application (date)
4.
Verification of prepayment amount received from SDA
(date) ________
d. Notice for Prepayment of Reimbursement
Contract
NOTIFICATION OF AMOUNT DUE FOR PREPAYMENT OF REIMBURSEMENT
CONTRACT YOU ARE HEREBY NOTIFIED THAT THE OFFICE OF THE STATE BOND COMMISSION
HAS RECEIVED YOUR REQUEST FOR PREPAYMENT OF THE FOLLOWING REIMBURSEMENT
CONTRACT:
1. Name of entity
2. Identifying information on reimbursement
contract to be prepaid with bond proceeds
Name___________________________________________
Series____________________IssueDate_______________
Amount of Original Issue ___________________________
Principal and Interest Payment Dates: P _______
I_______
A REVIEW OF OUR RECORDS INDICATES THAT THE FOLLOWING AMOUNTS
ARE DUE IN ORDER TO PREPAY THE REIMBURSEMENT CONTRACT ON OR BEFORE THE
FOLLOWING DATE ___________________
Cost of prepayment:
a. Principal $
b. Interest $
c. Redemption premium, if any $
d. Less Reserves $
e. Total amount due for prepayment $
IF YOU CONCUR WITH THE ABOVE FIGURES, SIGN AND RETURN THE
ORIGINAL OF THIS NOTICE TO THE ADDRESS SHOWN ABOVE. IF YOU DISAGREE WITH THE
ABOVE FIGURES, CONTACT THE FOLLOWING PERSON AT THE STATE BOND
COMMISSION:
________________________________________________
________________________________________________
________________________________________________
___________________ ___________________
State Debt Analyst Chief Financial Officer
e. Receipt Log
PARISH AND LOCAL GOVERNMENT REIMBURSEMENT CONTRACT PREPAYMENT
RECEIPT LOG
1. Name of prepaying
entity _______________________
2.
Identifying information on reimbursement contract to be prepaid
Name __________________________________________
Series ___________________ Issue Date _____________
Amount of Original Issue ___________________________
Principal and Interest Payment Dates: P _______ I
______
3. Check Number
________________________________
4.
Dated _______________________________________
5. Amount Received
______________________________
6.
Date Received _________________________________
7. Deposited into:
________________________________
(Account Name)
8. Yield restricted or yield reduction
payments owed in accordance with the following rates:
Rate of arbitrage yield for prepaying entity
__________
Rate of arbitrage yield for state bond issue
___________
9. Source of
Funding
a. Local Bond Issue?
__________________________
b.
Tax-Revenue? ______________________________
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
49:950 et
seq.
