Current through Reg. 49, No. 38; September 20, 2024
(a) Definitions.
The following words and terms have the following meanings when used in this
section, unless the context clearly indicates otherwise.
(1) Average life--The number determined by
dividing the sum of all payment periods by the total principal amount
.
(2) Borrower--Each eligible
Applicant that has received a commitment from the Board.
(3) Interest rate--The individual interest
rate for each maturity in an amortized debt schedule as identified by the
executive administrator under this chapter.
(4) Market rate--The individual interest rate
for each maturity in an amortized debt schedule payment that is the borrower's
market cost of funds based on the MMD scale for the borrower as identified
under subsection (c)(1) of this section.
(5) MMD--Thomson Reuters Municipal Market
Data Range of Yield Curve Scales.
(6) Payment period--The number determined by
multiplying the total principal amount due for an individual maturity as set
forth in the debt instrument by the standard period for the debt instrument
.
(7) Standard period--The number
identified by determining the number of days between the date of delivery of
the funds to a borrower and the date of the maturity of a bond or loan payment
pursuant to which the funds were provided calculated on the basis of a 360-day
year composed of twelve 30-day periods and dividing that number by
360.
(8) Term--For bonds, the
length of time between when the bond is issued and the final maturity in the
debt instrument; for loans, the period of time any principal is
outstanding.
(b)
Procedure for setting fixed interest rates.
(1) The executive administrator will set
fixed interest rates as described in the IUP and further determined in this
section, on a date that is:
(A) no earlier
than five business days prior to the adoption of the political subdivision's
bond ordinance or resolution or the borrower's execution of a loan agreement,
but may be based on interest rate levels determined as of an earlier date;
and
(B) not more than 45 days
before the anticipated closing of a commitment from the Board.
(2) After 45 days from the
assignment of the interest rate, rates may be extended only with the executive
administrator's approval.
(c) Fixed rates. The fixed interest rates for
financial assistance under this chapter will be determined as provided in this
subsection. The executive administrator will identify the market rate for the
borrower, determine the amount of adjustment from the market interest rate
scale appropriate for the borrower pursuant to paragraph (2) of this
subsection, apply the identified interest rate adjustment to the market rate
for each year of the borrower's scale to determine the interest rate, and apply
the interest rate to the proposed principal schedule, as more fully set forth
in this subsection.
(1) Identifying the market
rate for eligible borrowers.
(A) for
borrowers that have a rating by a recognized bond rating entity and will not
have bond insurance, the executive administrator will rely on the higher of the
appropriate MMD scale for the current bond rating of the borrower or the
appropriate MMD BAA scale; or
(B)
for borrowers with no rating by a recognized bond rating entity or for
borrowers with a rating that is less than investment grade as determined by the
executive administrator, the executive administrator will rely on the
appropriate MMD BAA scale.
(2) The fixed rate scale shall be established
for each borrower using individual coupon rates for each maturity of the
proposed debt based on the appropriate scale.
(3) The program is designed to provide
borrowers with an interest rate reduction from the fixed rate scale applicable
to the borrower based on a level debt service schedule, or if applicable, the
reduction is set at the total basis points below the fixed rate scale for
borrowers as derived under paragraph (3) of this subsection. Notwithstanding
the foregoing, in no event shall the interest rate as determined under this
section be less than zero.
(4) For
loans and bond commitments with an average life in excess of 16 years for a
term of up to 20 annual maturities or years or an average life in excess of 20
years for a term of up to 30 annual maturities or years (or a pro-rata
calculation for terms between 20 and 30 annual maturities or years), and at the
discretion of the Board for loans and bond commitments that have debt schedules
that produce a total fixed lending rate reduction in excess of a standard loan
or bond commitment structure (defined as a debt service schedule in which the
first year of the maturity schedule is interest-only followed by principal
maturing on the basis of level debt service), the following procedures will be
used to determine the total fixed lending rate reduction:
(A) The interest rate component of level debt
service will be determined by using the 15th year (19th year for 30-year terms)
coupon rate of the appropriate scale of the MMD scales that corresponds to the
15th year (19th year for 30-year terms) of principal of the standard loan or
bond commitment structure and that is measured 30 days from the date that
application is proposed to be presented to the Board for approval.
(B) Level debt service will be calculated
using the 15th year (19th year for 30-year terms) MMD Scale coupon rate as
described in subparagraph (A) of this paragraph and the par amount of the loan
or bond commitment according to a standard loan or bond commitment structure.
For a loan or bond commitment that has been proposed for a term of years equal
to a standard loan or bond commitment structure, the dates specified in the
application shall be used for interest and principal calculation. For a loan or
bond commitment that has been proposed for a term of years less than a standard
loan or bond commitment structure or longer than a standard loan or bond
commitment structure, level debt service will be calculated beginning with the
dated date, will be based upon the principal and interest dates specified in
the application, and will continue for the term of a standard loan or bond
commitment structure.
(C) A
calculation will be made to determine how much a borrower's interest would be
reduced if the loan or bond commitment had been made according to the total
fixed lending rate reduction provided in paragraph (3) of this subsection and
based upon the principal payments calculated in subparagraph (B) of this
paragraph.
(D) The Board will
establish a total fixed lending rate reduction for the loan or bond commitment
that will achieve the interest savings in subparagraph (C) of this paragraph
based upon the principal schedule proposed by the borrower.
(5) To determine the interest
rate, the following procedures will apply:
(A)
Unless otherwise requested by the borrower under subparagraph (B) of this
paragraph, the interest rate will be determined based on a debt service
schedule that provides interest only to be paid in the first year of the debt
service schedule and in which the remaining annual debt service payments are
level, as determined by the executive administrator. The executive
administrator will identify the appropriate MMD scale for the borrower and
identify the market rate for the maturity due each year. The executive
administrator will reduce that market rate of each year by the number of basis
points applicable according to paragraph (2) of this subsection and thereby
identify a proposed interest rate scale. The proposed interest rate scale will
be applied to the proposed principal repayment schedule. If the resulting debt
service schedule is level to the satisfaction of the executive administrator,
then the proposed interest rate will be the interest rate for the commitment .
If the resulting debt service schedule is not level to the satisfaction of the
executive administrator, then the executive administrator may adjust the
interest rate for any or all of the maturities to identify the interest rate
that as closely as possible achieves the interest savings applicable according
to paragraph (2) of this subsection while maintaining the principal schedule
proposed by the borrower.
(B) A
borrower may request a debt service schedule in which the annual debt service
payments are not level through the term of the amortized debt schedule , as
determined by the executive administrator. From the level debt service
schedule, the executive administrator will determine the amount of the subsidy
applicable to the debt service schedule provided . The executive administrator
will then identify the interest rate that as closely as possible provides the
borrower the identified subsidy amount for the principal schedule requested by
the borrower.
(d) Variable rates. The interest rate for
DWSRF variable rate debt under this chapter will be set at a rate equal to the
actual interest cost paid by the Board on its outstanding variable rate debt
plus the cost of maintaining the variable rate debt in the DWSRF. Variable rate
debt is required to be converted to long-term fixed rate financing within 90
days of project completion unless an extension is approved in writing by the
executive administrator. Within the time limits set forward in this
subdivision, borrowers may request to convert to a long-term fixed rate at any
time, upon notification to the executive administrator and submittal of a
resolution requesting such conversion. The fixed lending rate will be
calculated under the procedures and requirements of subsections (b) and (c) of
this section.
(e) NPNC borrowers.
NPNC borrowers that issue tax-exempt obligations and that operate
community/non-community water systems will receive interest rates pursuant to
subsections (b) - (d) of this section.
(f) Adjustments. The executive administrator
may adjust a borrower's interest rate at any time prior to closing as a result
of a change in the borrower's credit rating.
