Louisiana Administrative Code › Title 71 - TREASURY-PUBLIC FUNDS › Part III - Bond Commission-Debt Management › Chapter 17 - Reimbursement Contracts › Section III-1701 - Prepayment of Reimbursement Contracts

Current through Register Vol. 50, No. 6, June 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 &gt;
0 percent
13-24
Net Present Value Savings &gt;
1.5 percent
25-48
Net Present Value Savings &gt;
3.0 percent
&gt;48
Net Present Value Savings &gt;
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? ______________________________