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TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ENACTING THE PUBLIC SCHOOLS INFRASTRUCTURE BANK ACT OF 2004; BY ADDING CHAPTER 148 TO TITLE 59 SO AS TO DEFINE CERTAIN TERMS; TO CREATE THE SOUTH CAROLINA PUBLIC SCHOOL FACILITIES FINANCE AUTHORITY; TO PROVIDE FOR THE APPOINTMENT AND POWERS AND DUTIES OF THE BOARD THAT GOVERNS THE AUTHORITY; TO PROVIDE FOR PROJECT FINANCING AND WHEN THE AUTHORITY AND A SCHOOL DISTRICT MAY ENTER INTO A FINANCING AGREEMENT; TO PROVIDE FOR THE TERMS OF THE FINANCING AGREEMENT; TO PROVIDE FOR THE ISSUANCE OF BONDS IN THE NAME OF THE AUTHORITY TO BE SECURED SOLELY BY AND PAYABLE SOLELY FROM SCHOOL DISTRICT PAYMENTS; TO PROVIDE FOR A MAXIMUM MATURITY DATE OF THIRTY YEARS; TO PROVIDE FOR THE MANNER IN WHICH THE AUTHORITY MAY SELL BONDS AND THE TERMS OF THE BONDS; TO PROVIDE THE PURPOSES FOR WHICH THE BOARD MAY AUTHORIZE BONDS; TO PROVIDE FOR THE ESTABLISHMENT OF A DEBT SERVICE RESERVE FUND; TO PROVIDE THAT THE BONDS MAY BE SECURED BY A TRUST AGREEMENT; TO PROVIDE FOR THE MANNER IN WHICH THE ACCOUNTS OF THE AUTHORITY MUST BE HELD; TO PROVIDE THAT THE BONDS AND THE INCOME FROM THE BONDS AND PROPERTY AND INCOME FROM PROPERTY OF THE AUTHORITY ARE EXEMPT FROM TAXATION; TO PROVIDE THAT FIDUCIARIES MAY INVEST MONIES IN BONDS; TO PROVIDE BONDHOLDER RIGHTS; TO AMEND SECTION 59-71-155 OF THE 1976 CODE, RELATING TO GENERAL OBLIGATION SCHOOL BONDS, SO AS TO ALLOW THE PUBLIC SCHOOL FACILITIES FINANCE AUTHORITY TO ELECT WHETHER THIS SUBSECTION APPLIES TO ONE OR MORE YEARS IN WHICH SCHOOL DISTRICT PAYMENTS ARE DUE UNDER A FINANCING AGREEMENT BETWEEN A SCHOOL DISTRICT AND THE AUTHORITY AUTHORIZED PURSUANT TO CHAPTER 148 OF TITLE 59 WHERE THE AUTHORITY HAS ELECTED THAT THE SCHOOL DISTRICT PAYMENTS UNDER THE FINANCING AGREEMENT ARE SECURED BY THE FULL FAITH, CREDIT, AND TAXING POWER OF THE OPERATING SCHOOL UNIT THAT ISSUES THE BONDS; TO PROVIDE THE AUTHORITY'S AND THE STATE TREASURER'S POWERS AND DUTIES FOLLOWING A DEFAULT BY A SCHOOL DISTRICT OR THE EXERCISE BY A SCHOOL DISTRICT OF ITS RIGHT OF NONAPPROPRIATION UNDER A FINANCING AGREEMENT; AND BY ADDING SECTION 59-146-190 SO AS TO ALLOW REFUNDING STATE SCHOOL FACILITIES BONDS TO BE ISSUED UPON RESOLUTION BY THE STATE BUDGET AND CONTROL BOARD.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The General Assembly finds that there exists a need in many of the school districts of the State for new or improved school buildings in order to enhance educational achievement in the State. The General Assembly has determined to create the Public School Facilities Finance Authority so the State may provide assistance to the school districts of the State in the securing of financing for public school needs.
SECTION 2. This act may be cited as the "Public Schools Infrastructure Bank Act of 2004".
SECTION 3. Title 59 of the 1976 Code is amended by adding:
Section 59-148-10. As used in this chapter:
(1) 'Authority' means the Public School Facilities Finance Authority as established pursuant to this chapter.
(2) 'Board' means the governing body of the authority.
(3) 'Bonds' means special source bonds, notes, or other evidences of indebtedness of the authority payable solely from and secured solely by the school district payments, issued pursuant to this chapter and in Article X, Section 13(9) of the Constitution of this State.
(4) 'Financing Agreement' means an agreement between the authority and a school district providing for, among other things:
(a) the implementation of a project upon land;
(b) the use of the school facilities by that school district; and
(c) payment of school district payments by that school district.
(5) 'General obligation bonds' means general obligation bonds authorized to be issued by a school district.
(6) 'Project' means the construction and equipping of new school facilities, the renovation and equipping of existing school facilities, and the furnishing and equipping of new and renovated school facilities.
(7) 'School district or districts' means the public school districts of the State as of the effective date of this chapter as may be consolidated, divided or otherwise reorganized.
(8) 'School district payments' means amounts paid by school districts to the authority pursuant to a financing agreement.
(9) 'School facilities' means facilities operated by school districts for the purpose of providing early childhood, kindergarten, primary, secondary, and adult education, along with the land upon which facilities are situated.
(10) 'State' means the State of South Carolina.
Section 59-148-20. (A) The South Carolina Public School Facilities Finance Authority is created as a public body corporate and politic and an instrumentality of this State, with the responsibility of carrying out the public purpose of this chapter.
(B) The authority must be governed by the board. The board shall consist of five members. The State Treasurer shall serve as a member of the board, provided that a designee of the State Treasurer may act for the State Treasurer at a meeting of the board. The Chairman of the House Ways and Means Committee and the Chairman of the Senate Finance Committee each shall appoint one member for a term of four years, and each shall appoint a member having a term of two years. After the initial appointments, members must be appointed to terms of four years. The members of the board shall elect from their members one member to serve a one-year term as Chairman, and another member to serve a one-year term as Secretary. The members of the board and officers of the authority shall continue in office until replaced in pursuant to law.
(C) Members of the board serve without pay but are allowed the usual mileage, per diem, and subsistence as provided by law for members of State boards, committees, and boards.
(D) Members of the board and its employees, if any, are subject to the provisions of Chapter 13, Title 8, the Ethics, Government Accountability, and Campaign Reform Act, and Chapter 17 of Title 2, relating to lobbying.
(E) To the extent that administrative assistance is needed for the functions and operations of the authority, the board may obtain this assistance from the Office of the State Treasurer and the State Budget and Control Board, and any successor agency, office, or division, each of which shall provide the assistance requested by the board at no cost to the board or to the authority other than for expenses incurred and paid to entities that are not agencies or departments of the State. The board shall retain ultimate responsibility and provide proper oversight for the implementation of this chapter.
(F) The board shall exercise the powers of the authority. A majority of the members of the board constitutes a quorum for the purpose of conducting business. The board shall determine the number of personnel it requires, their compensation, and duties.
(G) In addition to the powers contained elsewhere in this chapter, the board has the power necessary, useful, or appropriate to operate and administer the authority, to effectuate the purposes of the authority, and to perform its other functions including, but not limited to, the power to:
(1) have perpetual succession;
(2) sue and be sued in its own name;
(3) adopt, promulgate, amend, and repeal bylaws, not inconsistent with provisions in this chapter for the administration of the authority's affairs and the implementation of its functions;
(4) have a seal and alter it at its pleasure, although the failure to affix the seal does not affect the validity of an instrument executed on behalf of the authority;
(5) enter into financing agreements with school districts, and other contracts, arrangements, and agreements with persons, that the board considers necessary;
(6) execute and deliver bonds issued pursuant to this chapter and other instruments necessary or convenient to the exercise of the powers granted in this chapter;
(7) enter into, amend, and terminate agreements in the nature of interest rate swaps, forward security supply contracts, agreements for the management of interest rate risks, agreements for the management of cash flow, and other agreements of a similar nature, with respect to bonds issued pursuant to this chapter;
(8) procure insurance, guarantees, letters of credit, and other forms of collateral or security or credit support from a public or private entity, including any department, agency, or instrumentality of the United States or this State, for the payment of bonds, including the power to pay premiums or fees on any insurance, guarantees, letters of credit, and other forms of collateral or security or credit support;
(9) borrow money through the issuance of bonds as provided in this chapter, and through the issuance of notes in anticipation of the issuance of these bonds;
(10) enter into contracts and expend funds to obtain accounting, management, legal, financial consulting, construction management, trusteeship, and other professional services necessary or convenient to the operations of the authority;
(11) enter into contracts or agreements necessary, proper, or convenient for the effectuation of the powers and purposes of the board and the authority;
(12) invest funds held by the authority pursuant to the chapter in an investment permitted for funds of this State, other than the State's retirement funds, or for funds of the political subdivisions of this State, in revenue bonds of government units, and in general obligations of other States whose general obligation debt is rated not lower than the general obligation debt of this State;
(13) do all other things necessary or convenient to exercise powers granted or reasonably implied by this chapter or that may be necessary for the furtherance and accomplishments of the purposes of the authority.
(H) In the exercise of its powers in this chapter, the board and the authority may obtain services in accordance with the procedures, guidelines, and criteria established by the board for that purpose and are not restricted by Chapter 35 of Title 11 or a successor provision.
Section 59-148-30. The authority shall assist the school districts of the State by providing for projects pursuant to this chapter.
(A) A project may be implemented on land owned by the authority or on land leased to the authority by a school district. Consent of another party to the sale or lease of real property by a school district to the authority in connection with the entry by that school district into a financing agreement is not required.
(B) The authority may not enter into a financing agreement with a school district unless it has made findings as to the essentially of the project. The authority may promulgate regulations providing the objective criteria by which essentiality may be determined by the authority.
(C) The authority may defray the cost of projects with the proceeds of one or more issues of bonds issued pursuant to Section 59-148-40. The authority also may apply to the cost of projects funds derived from another source, and may advance these funds to a school district pursuant to a financing agreement or make a grant of these funds to a school district as determined by the board.
(D) The authority shall provide for the use of school facilities pursuant to the terms of a financing agreement between the authority and a school district with such terms, not inconsistent with this chapter, as the authority shall determine.
(E) Funds derived from a financing agreement for the implementation of a project must not be expended unless that project has been approved by the State Department of Education pursuant to its regulations generally applicable to the renovation, expansion, and construction of school facilities.
(F) A financing agreement must include a schedule of payments to be paid by a school district to the authority as rent or the purchase price for the school facilities subject to the financing agreement. The schedule of school district payments must be established to provide sufficient funds to repay, ratably, bonds issued to finance one or more projects and to provide to the authority the amounts the board considers necessary to administer the authority's operations.
(G) Persons charged with handling funds advanced to a school district pursuant to a financing agreement must be adequately bonded, as determined by the authority, against defalcation.
(H) A financing agreement must provide that, upon the satisfaction of the school district payments due and to become due under the agreement, the school facilities subject to the agreement must be titled in the name of the school district that is the party to the financing agreement without encumbrance except as may have been agreed to by the school district.
(I) School district payments are payable on dates as provided in the applicable financing agreement. School district payments made within a given fiscal year may be derived from the proceeds of general obligation bonds of a school district or another source, except from the proceeds of ad valorem taxes levied for operational purposes within that fiscal year. A school district may not engage a financial advisor in connection with the issuance of general obligation bonds without the consent of the State Treasurer.
(J) A school district may not enter into a financing agreement unless it provides to the authority at the delivery of a financing agreement proof satisfactory to the authority that the amount of annual school district payments due under the agreement does not exceed seven percent of the assessed value of the school district.
(K) Financing agreements are deemed 'bonds' for purposes of Section 11-15-10 and Section 11-15-30. The authority is deemed a 'bona fide purchaser for value' within the meaning of Section 11-15-30 to the extent that it has advanced funds to a school district pursuant to a financing agreement.
(L) Application of bond proceeds to make school district payments is a lawful use of the proceeds, notwithstanding the provisions of a general or special law to the contrary.
(M) The obligation of a school district under a financing agreement must not be a continuing obligation, but must be a year-to-year obligation. The governing body of a school district that is a party to a financing agreement may terminate a financing agreement by failing to pay school district payments on their due date. In the event of a failure by a school district to make school district payments as provided in the applicable financing agreement, the school district shall vacate the school facilities and the board shall control the school facilities as provided in the financing agreement. The board shall take action it considers prudent to protect the interest of bondholders affected by the financing agreement termination, including, but not limited to, leasing the school facilities to one or more third parties. The right of the authority to control school facilities as provided in this paragraph ceases upon the termination or expiration of the authority's leasehold interest in the school facilities, if any.
(N) Any contract, arrangement, or agreement pursuant to which a school district makes payments to the authority or a third party for the purpose of acquiring the use of real property and permanent improvements including structures, buildings, and fixtures, is not a financial agreement within the meaning of Section 11-27-110. A contract, arrangement, or agreement entered into after the effective date of this chapter is subject to the limitations imposed in subsections (I) and (J) of this section and is considered a financing agreement within the meaning of this chapter for purposes of subsections (K) and (L) of this section.
Section 59-148-40. (A) The board may issue bonds in the name of the authority for the purposes and in the manner stated in this section.
(B) Bonds must be secured solely by and be payable from school district payments as provided in this chapter. The authority may apply other funds available to it to the payment of bonds. The other funds may be pledged to or otherwise secure the payment of bonds in the discretion of the board.
(C) The members of the board and a person executing the bonds or notes are not liable personally on the bonds or notes or subject to personal liability or accountability by reason of the issuance of the bonds.
(D) The board has no power to pledge the faith, credit, or taxing power of this State or any of its political subdivisions in connection with the issuance of the bonds, and each bond must recite on its face that it is a special source bond of the authority issued pursuant to and in accordance with this chapter and Article X, Section 13(9) of the Constitution of this State, that it is secured solely by and payable solely from school district payments, that it is neither a general or legal obligation of the State or any of its political subdivisions, and that it is not backed by the full faith, credit, or taxing power of this State or any of its political subdivisions. Failure to include this language on the face of a bond does not cause the bond to become a general or legal obligation of the State or any of its political subdivisions, or a pledge of the full faith, credit, or taxing power of this State or any of its political subdivisions.
(E) A pledge of school district payments made by the authority is valid and binding from the time the pledge is made. School district payments pledged and received by the authority are immediately subject to the lien of the pledge without physical delivery of the receipt or further act. The lien of the pledge is valid and binding against parties having claims in tort, contract, or otherwise against the authority, irrespective of whether the parties have notice of them. Neither the resolution of the authority or another instrument by which a pledge is created need be recorded or filed to perfect the pledge.
(F) The authority may not issue a bond with a scheduled maturity later than thirty years after the date of issuance.
(G) When issuing bonds, the authority may sell bonds either in a negotiated transaction with one or more lead underwriters selected by the board on the basis of criteria to be established by the board, or through a competitive bidding process in accordance with procedures to be established by the board. The determination of whether to sell bonds through negotiation or through competitive bidding must be made by the board.
(H) The authority may not issue bonds unless the board first has adopted its resolution authorizing the issuance, finding that the issuance and the proposed use of the bond proceeds is in accordance with this chapter, and setting out the terms and conditions of the bonds and the covenants of the authority with respect to the bonds. These terms must include the issuance date, the maturity date, the principal amount, the interest rates or the means of determining the interest rates, whether fixed or variable, the time, manner, and currency for paying interest and principal, the negotiability of the bonds and restrictions relating to the registration of the bonds. The covenants may include, without limitation, restrictions on the later issuance of additional bonds or making the later issuance subject to certain conditions relating to available debt service coverage or otherwise, or another matter that the board considers appropriate, subject to subsection (I) of this section.
(I) The board may not authorize or cause the authority to enter into a covenant that purports to create a general or legal obligation of this State or any of its political subdivisions or to pledge the full faith, credit, or taxing power of the State or any of its political subdivisions. A covenant in violation of this subsection is void.
(J) Subject to the requirements of this section, the board may authorize the issuance of bonds of the authority for the following purposes:
(1) refunding, on a current or advance-refunding basis, outstanding bonds of the authority;
(2) obtaining funds to finance projects;
(3) establishing reserves for the payment of bonds;
(4) paying the premiums for policies of insurance securing the bonds and providing reserves; and
(5) payment of costs of issuance of bonds.
(K) The bonds and the issuance of the bonds are subject to the provisions of Sections 11-15-20 and 11-15-30 and any successor provisions.
(L) In the proceedings authorizing the issuance of a series of bonds the authority may establish a debt service reserve fund and prescribe as the reserve requirement the amount of cash and securities required to be maintained in the fund. The proceedings must provide for valuation of the reserve fund at least annually. Proceeds of bonds or other funds and securities available to the authority may be applied to establish the reserve fund. The authority also may provide a surety bond in lieu of moneys within the reserve fund.
(M) In the discretion of the board, bonds issued pursuant to this chapter may be secured by a trust agreement by and between the authority and a corporate trustee, which may be a trust company or bank having the powers of a trust company within or without the State. The trust agreement or the resolution providing for the issuance of the bonds may contain provisions for protecting and enforcing the rights and remedies of the bondholders and of the trustees as may be reasonable and proper and not in violation of law, and may restrict the individual right of action by bondholders.
Section 59-148-50. Accounts of the authority must be held and maintained separately from other funds, properties, assets, and accounts of this State and its other agencies. The board shall keep an accurate account of its activities and its receipts and expenditures and annually, in January, shall report its activities to the State Budget and Control Board, the report to be in a form prescribed by the State Budget and Control Board with the written approval of the State Auditor. Audited financial statements must be submitted to the Comptroller General by October fifteenth following the end of the fiscal year.
Section 59-148-60. (A) The bonds and the income from the bonds are exempt from taxation in the State except for inheritance, estate, or transfer taxes, regardless of the federal income tax treatment of the interest from the bonds.
(B) The exercise of the powers granted by this chapter are for the benefit of the citizens of the State and for the promotion of their welfare, convenience, and prosperity. Property, whether real or personal, tangible or intangible, of the authority and the income and operations of the authority are exempt from taxation or assessment by the State or any of its political subdivisions.
(C) It is lawful for executors, administrators, guardians, committees, and other fiduciaries to invest any monies in their hands in bonds. This section must not be construed as relieving a person from the duty of exercising reasonable care in selecting investments.
Section 59-148-70. The State pledges and agrees with the authority, and the holders of the bonds in which the authority has included the pledge and agreement, that the State may not limit or alter the rights of the authority to fulfill the terms of its agreements with the holders, and may not impair the rights and remedies of the holders or the security for the bonds until the bonds, together with the interest on them and the costs and expenses in connection with any action or proceeding by or on behalf of the holders, are paid fully and discharged."
SECTION 4. Section 59-71-155(A) of the 1976 Code, as added by Part II, Section 65 of Act 155 of 1997, is amended to read:
"(A) This section applies to existing and future general obligation bonds issued by an operating school unit. For purposes of this section, general obligation bonds are obligations expressly secured by the full faith, credit, and taxing power of the operating school unit that issues the bonds. Subsection (F) applies to a financing agreement authorized pursuant to Chapter 148, Title 59 between a school district and the Public School Facilities Finance Authority (the authority), where the authority has elected that the school district payments scheduled under the financing agreement are secured by the full faith, credit, and taxing power of the operating school unit that issues the bonds."
SECTION 5. Section 59-71-155 of the 1976 Code, as added by Part II, Section 65 of Act 155 of 1997 is amended by adding subsection (F) at the end to read:
"(F) The Public School Facilities Finance Authority (the authority) may elect that this subsection applies to one or more years in which school district payments are due under a financing agreement. If the authority elects that this subsection applies, it must be stated clearly in the financing agreement. Following a default by a school district or the exercise by a school district of its right of non-appropriation under a financing agreement authorized by Chapter 148 of Title 59 and to which this section applies, the authority shall notify the State Treasurer, and the State Treasurer shall transfer to the authority from the general fund of the State the amounts that would have been paid by the school district pursuant to the financing agreement without the default or nonappropriation on the dates that the payments would have been made. However, the total amount to be advanced to operating school units for this purpose and for the purposes described in Section 59-71-155(B) in any fiscal year may not exceed the amount appropriated in that year under the Education Finance Act. The State Treasurer shall withhold from the school district from the next and subsequent distributions of revenue to that school district to the extent provided in the financing agreement sufficient monies necessary to reimburse the general fund of the State for the sums applied to pay the amounts paid by the State Treasurer to the authority and for the investment earnings that would have been received on the monies advanced from the general fund. In addition, if provided in a financing agreement, the State Treasurer may direct the school district and the county treasurer of the county in which the school district is situated to apply to the payment due on the bonds monies being held by the school district or county treasurer in a fund, other than the school district's sinking fund, derived from state revenue for the school district."
SECTION 6. Chapter 146, Title 59 of the 1976 Code is amended by adding:
"Section 59-146-190. One or more issues of refunding state school facilities bonds may be issued to refund the state school facilities bonds issued pursuant to the authorizations of this chapter, provided a savings results. The issuance of refunding state school facilities bonds must be authorized by resolution of the State Budget and Control Board. The refunding state school facilities bonds must bear the date and mature at the time that the resolution provides, except that no refunding state school facilities bond may mature more than thirty years from its date of issue. The refunding state school facilities bonds may be in the denominations, be payable in the medium of payment, be payable at the place and at the time, and be subject to redemption or repurchase and contain other provisions determined by the State Budget and Control Board before their issuance. The bonds may bear interest payable at the times and at the rates as determined by the State Budget and Control Board. The provisions of Sections 59-146-100 through 59-146-150 apply to refunding state school facilities bonds."
SECTION 7. This act and all powers granted by this act must be liberally construed to effectuate its intent and their purposes, without implied limitations on them. This act constitutes full and complete authority for all things herein contemplated to be done. All rights and powers granted in this act shall be as cumulative with those derived from other sources and shall not, except as expressly stated in this act, be construed in limitation thereof. Insofar as the provisions of this act are inconsistent with the provisions of any other act, general or special, the provisions of this act are controlling. If any clause, sentence, paragraph, section, or part of this act be adjudged by any court of competent jurisdiction to be invalid, this judgment shall not affect, impair, or invalidate the remainder of this act but is confined in its operation to the clause, sentence, paragraph, section, or part of the act directly involved in the controversy in which the judgment shall have been rendered.
SECTION 8. This act takes effect upon approval by the Governor.
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