DEPARTMENT OF TREASURY

                           STATE TREASURER

         SCHOOL BOND QUALIFICATION, APPROVAL, AND LOAN RULES

(By authority conferred on the state treasurer by section 11 of 2005  PA  92, 
MCL 388.1931, and section 33 of 1969 PA 306, MCL 24.201 to 24.328)


                     PART 1.  GENERAL DEFINITIONS

R 388.1   Definitions.
  Rule 1.  (1)  As used in these rules:
  (a)  "Act" means the school bond qualification,  approval,  and  loan  act, 
2005 PA 92, MCL 388.1921 et seq.  
  (b)  "Business day" means any day that does not fall on a Saturday, Sunday, 
or state legal holiday.
  (c)  "Calendar day" means  any  day  represented  on  the  yearly  calendar 
including Saturday, Sunday, and state legal holidays.
  (d)  "Debt service" means principal and interest payments on qualified bond 
issues and associated fees related to those bonds.
  (e)  "Department" means the Michigan department of treasury.	
  (f)  "Mandatory final loan repayment date" means the date specified in  the 
loan agreement entered into by a school  district  under  the  act  by  which 
principal and interest on all qualified loans related to all qualified  bonds 
are finally due.
  (g)  "Projected debt millage levy" means the number of mills in  any  year, 
not less than 7 mills and not more than 13 mills,  that,  if  levied  by  the 
school district, will generate sufficient annual proceeds  to  pay  principal 
and interest on all the school district's  existing  and  proposed  qualified 
bonds plus principal and interest on all qualified  loans  related  to  those 
qualified bonds less funds on hand and legally available for that purpose not 
later than the dates defined in the act or in these rules. 
  (h)  "Qualification" means the process of  qualifying  bonds  or  loans  in 
accordance with section 4 to section 13  of  2005  PA  92,  MCL  388.1924  to 
388.1933.
  (i)  "Refunding bond" means  a  bond  issued  to  refund  or  refinance  an 
existing qualified bond or outstanding qualified loan owed to the state under 
this act.  
  (j)  "State legal holiday" means those days designated in section 1 of 1865 
PA 124, MCL 435.101.
  (k)  "Treasurer" means the Michigan state treasurer as defined by  2005  PA 
92, MCL 388.1923.
  (l)  A term defined in the act has the same  meaning  when  used  in  these 
rules.

  History: 2007 AACS.


                  PART 2.  SCHOOL BOND QUALIFICATION


R. 388.2  Preliminary qualification; application.
  Rule 2. (1) A completed preliminary qualification application shall include 
submission to the department of all of the following information:
  (a)  The proposed ballot language to be submitted to  the  electors,  which 
shall include all language required by the following statutes:
  (i)  MCL 380.1361, the revised school code.
  (ii)  MCL 211.24f, general property tax act.
  (iii)  Section 28 of the Act.
  (iv)  Any other applicable law.
  (b)  A description of the project or projects to be financed that  includes 
all of the following:
  (i)  A cost analysis providing summary totals that can be matched to budget 
estimates as reported by the school district.
  (ii)  For new construction, all of the following should be included:
  (A)  The estimated number of rooms.
  (B)  The types of rooms expected to be constructed.
  (C)  The estimated square footage of the project or projects.
  (D)  The estimated cost per square foot.
  (iii)  For remodeling and  site  work,  all  of  the  following  should  be 
included:
  (A) The planned use of the space.
  (B) The type of work expected to be performed.
  (C) The estimated total cost of the work to be performed.
  (iv)  For site acquisitions, either of the following should be included:
  (A)  The cost per acre. 
  (B)  The  total  cost  of  acquisition,  or  if  such  information  is  not 
available, the estimated total cost of acquisition.  
  (v)  For technology, furnishings, and  equipment,  school  districts  shall 
provide detail regarding the types of technology, furnishings, and  equipment 
to be purchased.
  (c)  A pro forma debt  service  projection,  which  shall  demonstrate  the 
following:
  (i)  That the proceeds of the school district's projected debt millage levy 
will be sufficient to repay principal and  interest  on  all  of  the  school 
district's existing and proposed  new  qualified  bonds  plus  principal  and 
interest on all qualified loans related to those bonds  not  later  than  the 
mandatory final loan repayment date. 
  (ii)  That the school district's projected average growth in taxable  value 
is based on the following assumptions:
  (A)  For the first 5 years following the date of the application, assume no 
higher than the average growth in taxable value for the 5 years preceding the 
date of the application.
  (B)  For the remaining term after the first 5 years following the  date  of 
the application, assume the lesser of the average growth in taxable value for 
the 5 years preceding the date of the application or 3%.   
  (d)  The utilization rate for each  project  included  in  the  preliminary 
qualification application, which meets the following specifications:
  (i)  The utilization rate shall be calculated  by  dividing  the  projected 
5-year enrollment by the standard  pupil  capacity  factor  provided  by  the 
department.
  (ii)  The 5-year enrollment projection used in this  calculation  shall  be 
obtained from an enrollment  projection  service  provider  approved  by  the 
department.
  (iii)  When the  utilization  rate  for  any  building  is  below  60%  for 
remodeling projects  and  85%  for  new  construction  projects,  the  school 
district shall submit a written explanation of such variance  discussing  the 
actions the school district intends to take to address the underutilization.
  (e)  Evidence that the cost per square foot of the project or projects will 
be reasonable in light of economic conditions applicable  to  the  geographic 
area in which the school district is located.
  (f)  An amortization schedule in accordance with MCL  388.1925  (2)(m)  and 
MCL 388.1927(1)(d).
  (g)  A completed prequalification application also includes  the  following 
data, which the department shall use for informational purposes only:
  (i)  The weighted average age of  all  school  buildings  involved  in  the 
proposed project or projects based on square footage.
  (ii)  The school district's taxable value per pupil.
  (iii)  The total bonded debt outstanding of the  school  district  for  the 
school district fiscal year in which the application is filed.
  (iv)  The total taxable value of property in the school  district  for  the 
school district fiscal year in which the application is filed.
  (v)  A statement describing any environmental or usability problems  to  be 
addressed by the project or projects.
  (vi)  An architect's analysis of the overall condition of the facilities to 
be renovated or replaced as a part of the project or projects.  
  (2)  The department shall determine the reasonableness of cost  per  square 
foot  by  comparing  the  cost  included  in  the  preliminary  qualification 
application to the cost per square foot parameter announced annually  by  the 
department.  The cost per square foot parameter  announced  annually  by  the 
department shall be calculated from data derived from  reputable  independent 
sources including but not limited to R.S. Means or such similar  entity  that 
provides reliable objective information.
  (3)  If it has been more than 12 months since the preliminary qualification 
was approved, then a school district shall submit the  following  information 
to update the application  prior  to  submitting  an  application  for  final 
qualification:
  (a)  A status report of any  previous  series  of  bonds  included  in  the 
authorization. 
  (b)  Updated project sheets for  each  project  included  in  the  proposed 
series and supporting cost detail, as described in R 388.2(1)(b). 
  (c)  A cost summary sheet for proposed bond series.
  (d)  An updated pro forma debt service projection  showing  bond  structure 
for proposed series.  

  History: 2007 AACS.


R 388.3  Qualification of bonds.
  Rule 3. (1) To obtain final qualification of bonds, a school district shall 
submit a final qualification application and supporting documentation in  the 
form prescribed by the department.
  (2)  Supporting documentation shall include all of the following:
  (a)  A cover letter from legal counsel indicating  the  requested  approval 
date and delivery date if known at the time of submission.
  (b)  The certified canvass of election for building and site bonds.
  (c)  An updated pro  forma  debt  service  projection  as  described  in  R 
388.2(1)(c). 
  (d)  A copy of the resolution authorizing the issuance of bonds. 
  (e)  A copy of the resolution authorizing the  sale  of  bonds  if  such  a 
resolution is applicable.
  (f)  The preliminary or final official statement, whichever is available at 
the time of submission.
  (g)  A draft of the proposed bond counsel opinion.
  (3)  Supporting documentation for refunding bond issues shall also  include 
both of the following: 
  (a)  Additional financial schedules that document net present value savings 
of the refunding bond issue.
  (b)  A draft verification report of mathematical accuracy of the  refunding 
tables, prepared by an independent source.
  (4)  If a school district does not issue its  qualified  bonds  within  180 
days after the date of the order qualifying bonds, then the  school  district 
shall submit a  revised  application  and  updated  pro  forma  debt  service 
projection to the department.
  (5)  Notwithstanding the repayment requirements of these rules,  all  bonds 
qualified under the act and Article IX of  the  state  constitution  of  1963 
shall be considered qualified upon issuance of the order qualifying bonds  by 
the state treasurer until final maturity.  

  History: 2007 AACS.


R 388.4   Debt service payment dates.
  Rule 4.  Qualified bonds shall be payable as to principal  on  May  1,  and 
shall be payable as to interest on May 1 and November 1.

  History: 2007 AACS.


R 388.5  Guidelines.
  Rule 5.  The department shall issue  guidelines,  in  accordance  with  the 
administrative procedures act, as needed, to  assist  school  districts  with 
completing prequalification and qualification applications.  

  History: 2007 AACS.


                  PART 3.  SCHOOL LOAN REVOLVING FUND LOANS


R 388.6  Certification of computed millage. 
  Rule 6.  A school district shall authorize and certify the levy of its full 
computed millage before borrowing from the school loan revolving fund.  

  History: 2007 AACS.


R 388.7  Report of taxable value decrease.
  Rule 7.  All school districts that issue qualified bonds shall  report  the 
amount of any reduction in taxable value to  the  department  in  writing  by 
September 1 of any calendar year in which the taxable  value  of  the  school 
district decreases in comparison to the previous calendar year.  

  History: 2007 AACS.


R 388.8  Annual loan activity application.
  Rule 8.   A  completed  annual  loan  activity  application  shall  include 
submission to the department of all of the following:  
  (a)  A cover transmittal letter.
  (b)   An  annual  loan  activity  application  consisting  of  a  certified 
resolution in the  form  prescribed  by  the  department  providing  for  the 
following:
  (i)  Designation  and  authorization  of  a  school  district  official  to 
complete all required and necessary documents  related  to  the  school  loan 
revolving fund.
  (ii)  Approval of the estimated amount to be disbursed from  or  repaid  to 
the school loan revolving fund.
  (iii)  Certification of the amount of qualified debt millage to be levied.
  (iv)  Agreement to take actions or refrain from taking actions as necessary 
to maintain the tax-exempt status of any bonds or notes issued by  the  state 
in accordance with  the  state  constitution  of  1963  or  by  the  Michigan 
municipal bond authority in accordance with the act.
  (c)  An annual loan activity worksheet.
  (d)  Copies of reconciled bank statements to support the debt fund  balance 
reported on the annual loan activity worksheet.
  (e)  Any other documentation and information  necessary  to  determine  the 
amount of the disbursement or repayment.

  History: 2007 AACS.


R 388.9  Worksheet/draw request.
  Rule 9. (1)  A completed draw  request  shall  include  submission  to  the 
department of all of the following:
  (a)  A cover transmittal letter.
  (b)  A worksheet/draw request.
  (c)  Copies of reconciled bank statements to support the debt fund  balance 
reported on worksheet/draw request.
  (d)  Any other documentation and information  necessary  to  determine  the 
amount of the disbursement.
  (2)  If the state or the  Michigan  municipal  bond  authority  issues  tax 
exempt bonds for purposes of funding qualified  loans  related  to  qualified 
bonds, as defined in the act, then school districts that receive proceeds  of 
those tax exempt  bonds  shall  use  such  proceeds  towards  the  district's 
qualified debt service within 5 business days of receipt.

  History: 2007 AACS.


R 388.10  Mandatory final loan repayment dates for borrowing related  to  new 
bond issues.
  Rule 10.  The mandatory final loan repayment dates for borrowing related to 
new bond issues shall be determined as follows:
  (a)  For school districts that had outstanding qualified loans, applied for 
qualification before May 25, 2005, and passed a new qualified  bond  proposal 
in the year 2005, the mandatory  final  loan  repayment  date  for  borrowing 
related to the new bond issue shall be a date not later than 72 months  after 
the final maturity date of the new bond issue. 
  (b)  For school districts with outstanding qualified loans that applied for 
qualification after May 25, 2005, the mandatory final loan repayment date for 
borrowing for a new bond issue is as follows:
  (i)  The mandatory final  loan  repayment  date  for  the  qualified  loans 
related to the outstanding qualified bonds as stated in the loan agreement.
  (ii)  If the school district has prepaid the outstanding amount owed to the 
state, a date not later than 72 months after the final maturity date  of  the 
new bond issue. 
  (c)  For school districts that have no  outstanding  qualified  loans,  the 
mandatory final loan repayment date for borrowing related to a new bond issue 
shall be not later than 72 months after the final maturity date  of  the  new 
bond issue.  

  History: 2007 AACS.


R 388.11 Interest rates on qualified loans.
  Rule 11. (1) All qualified loans outstanding prior to the effective date of 
the act being July 20, 2005, shall continue to bear interest as  provided  in 
the repayment agreements entered into between  the  district  and  the  state 
before the effective date of the act.  
  (2) The  interest  rate  on  qualified  loans  shall  be  calculated  on  a 
weighted-average  basis  applying  the  applicable  interest  costs  of   all 
outstanding school loan bonds and computed to the nearest 1/8 of 1 percent.
  (3) All qualified loans issued subsequent to the effective date of the  act 
being July 20, 2005, shall bear interest as defined in sec. 9(8) of the act.	
  (4) The department shall recalculate the interest  rate  on  all  qualified 
loans whenever any of the following occur:  
  (a) Additional school loan bonds are issued.
  (b) Existing school loan bonds are refunded.
  (c) Principal payments are made on existing school loan bonds.
  (d) Variable interest rates are adjusted on school loan bonds.
  (5) Interest on  all  qualified  loans  shall  be  compounded  annually  on 
September 30.  

  History: 2007 AACS.


R 388.12 Repayment; invoices.
  Rule 12.  (1) When the revenue generated by a  school  district's  computed 
millage levied in a 12-month period exceeds the debt service due on qualified 
bonds during that 12-month period, then the school  district  shall  pay  the 
difference, less a reasonable amount of funds on hand, as determined  by  the 
state treasurer, to cover  minimum  balance  requirements  or  potential  tax 
disputes, to the department as payment of the outstanding loan.  
  (2)  The department shall issue an invoice to the school district at  least 
once a year when the information  contained  in  a  loan  activity  statement 
demonstrates that the revenue generated by a school district's  levy  of  the 
computed millage will exceed the annual debt service on the bonds.  
  (3)  The school district shall remit the amount specified in the invoice to 
the department not later than the next succeeding May 15 after the dated date 
of the invoice. 
  (4)  The school  district  shall  promptly  submit  to  the  department  an 
explanation of any difference  between  the  invoiced  payment  due  and  the 
payment remitted.  

  History: 2007 AACS.


                        PART 4. NONCOMPLIANCE


R 388.13  Noncompliance; remedies.
  Rule 13.  (1)  The following situations constitute noncompliance:
  (a)  A school district that owes the  state  loan  repayments  relating  to 
qualified bonds fails to levy at least the computed millage upon its  taxable 
value for debt retirement purposes for qualified  bonds  or  qualified  loans 
under the act.
  (b)  A school district fails to honor its agreement to  repay  a  qualified 
loan or any installment of a qualified loan.
  (c)   A  school  district  fails  to  file  or  correctly   file   required 
documentation as defined in the act or these rules.
  (2)  In the event of noncompliance, the school district shall do all of the 
following as required by the department:
  (a)  File or correct the required documentation.
  (b)  Increase its debt levy in the next succeeding year to obtain the funds 
necessary to repay the amount of the default plus a late charge that shall be 
3% of the amount due.  If a school  district  fails  to  levy  at  least  the 
computed millage upon its taxable  value,  then  the  school  district  shall 
increase its debt levy in the next  succeeding  year  to  obtain  the  amount 
necessary to repay the amount of the default plus a late charge that shall be 
3% of the amount due even when such an  increase  will  be  higher  than  the 
computed millage.
  (c)  Shall pay to the state the amount of the  default  plus  the  3%  late 
charge together with  any  other  amounts  owed  during  the  next  tax  year 
following the year in which the default occurred.  
  (3)   The  department  shall  not  disburse  state  school   aid   to   the 
non-complying school district until  arrangements  for  the  payment  of  the 
amount in arrears are made with the department's approval. 
  (4)  Failure of a school district to comply with application due  dates  or 
failure  of  a  school  district  to   process   any   report,   application, 
confirmation, or repayment as required under the act or in  these  rules  may 
result in 1 or both of the following:
  (a)  The department may issue a notification to the school board  requiring 
a written response of remedy.  
  (b)  The department may withhold a school district's state aid funds  until 
the school district complies with all requirements.
  (5) None of the following situations constitutes noncompliance:
  (a)  Taxpayer delinquencies.
  (b)  Failure of projected pupil or tax base growth rates  to  meet  initial 
projections.
  (c)  Decline in the school district tax base.

  History: 2007 AACS.


                            PART 5.  REFUNDING


R 388.14   Refunding qualified loans.
  Rule 14. (1)  School districts that intend to refund qualified  loans  owed 
to the state under the act  shall  disclose  the  intent  to  do  so  in  the 
information submitted to the electors at the time of  the  election  for  the 
related new money bonds, if any.
  (2)  If a school district intends to use the proceeds of a  qualified  bond 
to refund all or a portion of  its  outstanding  qualified  loans,  then  the 
school district shall submit pro forma  statements  prepared  by  the  school 
district's  financial  advisor  demonstrating  that  the  refunding  of   the 
outstanding qualified loans will result in a net present value savings to the 
school district.  A school district may request, in writing, approval  of  an 
exception to this requirement, which  shall  be  granted  if  the  department 
determines that a reasonable basis for the exception exists, as described  in 
MCL 141.2611(2) of the revised municipal finance act.
  (3)  For the purposes of calculating the net present value of the principal 
and interest of the qualified loans being refunded, the interest rate applied 
shall be the greater of 5% or  the  historical  5-year  average  school  loan 
revolving fund loan interest rate as provided by the department.
  (4)  Qualified bonds issued to refund outstanding qualified loans shall not 
be issued for a  term  longer  than  the  projected  repayment  term  of  the 
qualified loans as of the date of the refunding.

  History: 2007 AACS.


R 388.15   Refunding bonds.
  Rule 15.  (1)  Bonds issued to refund qualified bonds shall comply with the 
provisions of the revised municipal finance act, 2001 PA 34, MCL 141.2101.
  (2)  The term of the refunding bond shall be not longer than  the  term  of 
the original bond issue being refunded.
  (3)  The issuance of refunding bonds should not result in greater borrowing 
from the school loan revolving fund than would occur without the refunding. 

  History: 2007 AACS.


                  PART 6.  VARIABLE INTEREST RATE DEBT 


R 388.16  Variable interest rate, interest rate  exchange,  swap,  hedge,  or 
similar agreements.
  Rule 16.  (1)  School  districts  using  variable  interest  rate  debt  or 
entering into interest rate exchanges, swaps, hedges  or  similar  agreements 
shall do all of the following:
  (a)  Maintain a minimum fund balance within any applicable Internal Revenue 
Service regulations sufficient  to  limit  borrowing  from  the  school  loan 
revolving fund to the regularly scheduled May and November borrowings.
  (b)  Provide supplemental schedules with current estimates of debt  service 
payments projected for the upcoming year along with  the  submission  of  the 
annual loan activity application.   
  (c)  Provide written notification to the department if changes are made  to 
the indenture documents.  If the  department  does  not  respond  in  writing 
within 30 days after receipt  of  the  notification,  then  the  parties  may 
proceed with the transaction. 
  (2)  A school district may not borrow from the school loan  revolving  fund 
to pay a termination payment or similar payment related to the termination or 
cancellation of an interest rate exchange or swap, hedge,  or  other  similar 
agreement entered into or modified after  July  20,  2005,  pursuant  to  MCL 
388.1923(3)(b). 

  History: 2007 AACS.


                          PART 7. TIME COMPUTATION


R  388.17   Business and calendar days in the act.
  Rule 17. Unless otherwise required by these  rules,  when  the  act,  these 
rules, or related guidelines refer to time periods of  7  days  or  less,  it 
shall mean business days.  When the act, these rules, or  related  guidelines 
refer to time periods greater than 7 days, it shall mean calendar days.  

  History: 2007 AACS.


                              PART 8. APPEALS 


R 388.18   Appeals.
  Rule 18.  (1)  A school district may appeal  a  decision  of  a  designated 
representative  of  the  department  to  the  state  treasurer  directly   by 
submitting a written request  for  reconsideration  by  the  state  treasurer 
detailing the grounds  for  the  request  within  30  calendar  days  of  the 
decision.   
  (2)  The state treasurer  shall  issue  a  final  determination  within  30 
calendar days of receipt of the appeal request.  
  (3)  Decisions of the state treasurer are final.  
  (4)  A school district may seek judicial review of a decision in accordance 
with the provisions of section 631 of 1961 PA 236, MCL 600.631.

  History: 2007 AACS.