SB 238 REGIONAL ED COOPERATIVE REVENUE BOND ACT

Sen William F Burt

Actions: [4] SCC/STBTC/SFC-SCC

Scheduled: Not Scheduled

 Senate Bill 238 (SB 238) enacts the Regional Education Cooperative Revenue Bond Act and  provides powers and duties. SB 238 provides processes and procedures for the issuance of tax-exempt revenue bonds and refund bonds for capital projects to carry out the functions of a regional education cooperative. SB 238 allows a coordinating council of a regional eduction cooperative to issue bonds or request the New Mexico Finance Authority to issue the bonds. SB 238 makes an appropriation. 

 SECTION 1 adds a new section of the Public School Code to create the Act.

SECTION 2 provides definitions as used in the Act.

SECTION 3  allows that  a coordinating council (Council) may issue and sell regional education cooperative revenue bonds or may request the New Mexico Finance Authority (NMFA) to issue and sell the bonds.

SECTION 4 requires the Council shall make a determination that the capital project is necessary, provide reports to the department and obtain department approval.

A. Prior to the issuance of bonds to finance a capital project, a Council shall make a determination that the capital project is necessary and that the cooperative has enough pledgeable income to repay and discharge any bonds issued and to provide for the payment of operation, maintenance and other expenses of the property and buildings or structures resulting from the bond issuance as well as general operations of the cooperative. 

B. Prior to issuing bonds to finance some or all of a capital project, a Council shall furnish the department the information specified in this subsection.

C. Prior to giving written approval to the Council to issue bonds, the department shall determine that the capital project is necessary and that sufficient income will be produced to repay and discharge the bonds.

SECTION 5 provides for a pledge of revenue and a satisfaction of indebtedness.

A. Bonds issued shall irrevocably pledge, for the prompt payment of the costs on the bonds, the cooperative's pledgeable income. The bonds shall be equally and ratably secured by this pledge. 

B. Upon the issuance of bonds, the Council shall establish a reserve fund in accordance with state or federal law to be used for the bonds’ repayment. 

C. Satisfaction of any indebtedness created by any bonds issued shall be limited solely to foreclosure of the capital project, without the right to a deficiency judgment.

SECTION 6 specifies treatment of proceeds from bonds and retirement of the fund.

A. Proceeds from the sale of bonds issued shall be deposited into a separate account to be used solely for the specific purposes for which the bonds were issued. All costs incident to issuing and selling the bonds may be paid out of the proceeds of this account. 

B. The Council shall establish a fund to be known as the "retirement fund” (Fund). All proceeds remaining after completion of the capital project shall be deposited in the Fund, and pledgeable income sufficient to pay at least the next two principal and interest payments shall be deposited into the Fund. Money in the Fund shall be used solely for the purpose of repaying the principal, interest and service charges on the bonds.

SECTION 7 adds a new section to specify the bond requirements.
All bonds issued pursuant to the Act shall: 

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

B. have a duration of time not to exceed 30 years from their date of issuance; 

C. bear interest at a rate not to exceed a net of 12 percent a year, with interest payable semiannually; 

D. be sold at a price that 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; 

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

F. be issued in one or more series and may be sold at public or private sale, with or without a discount, as provided by Subsection D of this section." 

SECTION 8 allows a Council to issue refunding bonds.

A. A Council or the NMFA may issue refunding bonds to refund outstanding bonds. 

B. Except as otherwise provided in the Act, refunding bonds shall conform to the provisions of that act that provide for the issuance of bonds by a Council or the NMFA. 

C. A refunding bond may have the same security or source of payment as was pledged for the payment of the bond being refunded or may have a different source of pledgeable income. 

D. A refunding bond may be delivered in exchange for a bond authorized to be refunded, sold at a public or private sale or sold in part and exchanged in part, as provided in the Supplemental 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 shall be placed in trust to be applied to payment of the bonds. 

SECTION 9 adds a new section to provide directions for issuance, sale and use of proceeds for refunding bonds.

A. A bond shall not be refunded unless it matures or is callable for prior redemption under the terms 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 issues. Bonds and refunding bonds may be issued separately or in combinations of one or more series. 

C. When a refunding bond is sold, the net proceeds may, in the discretion of the Council, be invested in obligations as specified in this subsection, but the obligations purchased 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, together with interest and redemption premiums. 

D. All obligations purchased with the net proceeds from refunding bonds shall be deposited in trust with a bank that meets the specifications of this subsection. The obligations shall be held and liquidated and the proceeds of the liquidation shall be paid out for payment as specified in this subsection.

E. The determination of the Council or the NMFA issuing refunding bonds that the issuance has been in compliance with the Act is conclusively presumed correct in the absence of fraud or arbitrary and gross abuse of discretion. 

F.  Provides a definition of “net proceeds” as used in this section.

SECTION 10 exempts bonds from taxation by the state and specifies that no obligation created pursuant to the Act shall be a debt of the state.

SECTION 11 makes an appropriation of $6,000,000 from the General Fund to regional education cooperative nine for expenditure in Fiscal Years 2024 through 2028 for an early childhood center in Ruidoso. Any unexpended or unencumbered balance remaining at the end of Fiscal Year 2028 shall revert to the General Fund.