Section 071-61-11 - FINANCING SCHOOL CONSTRUCTION1. All school construction project funds (both state and local) shall be deposited in a newly established school construction interest-bearing account with unused proceeds remaining invested at all times. School construction project funds maintained in bank and investment accounts shall not be commingled with non-project funds of the SAU.2. Accurate financial records shall be maintained, in the SAU's accounting system, of all fiscal transactions and activities relative to the construction project, including: B. all expenditures including all expenditures from proceeds of notes and bonds issued for the project by date, payee and amount;C. all investment earnings on notes and bonds issued for the project by date, source and amount;D. short-term borrowing and investments of bond proceeds (particularly the dates and rate of interest);F. other related project documents. Parties must maintain all records for which they are responsible. Parties that may be directly involved with maintaining records are municipal officials, the municipal finance director or town treasurer, the superintendent of schools, or the SAU's financial staff. Prior to the final compliance review conducted by the compliance review staff, all project-related records shall remain in a secure and accessible on-site location. After the final compliance review is conducted by the compliance review staff, all project-related records shall be retained for seven years. These records shall remain in a secure and accessible location for two years and then may be transferred to a secure location for the remaining five years. Department personnel may meet regularly with SAU staff during the project to provide guidance on record-keeping.
Parties should retain records in accordance with the requirements certified by the SAU to its lender for tax exempt bond financing and in anticipation of possible audits by the Internal Revenue Service.
School construction revenues and expenditures must be included in quarterly financial reporting to the Department's financial reporting system.
3.State FundsThe Department shall include the appropriate amount of debt service principal and interest in an SAU's debt service allocation.
4.Investment of Project FundsA. Unused portions of note proceeds, bond proceeds, and any interest earned thereon, shall be kept invested at all times with:(1) adequate consideration to safety of principal;(2) sufficient liquidity for project needs and subject to those paramount considerations; and(3) the highest available interest rate.(4) Such investments shall also be in accordance with 30-A M.R.S.A. §5706 and § 5711.B. If the compliance review reveals that project funds were not deposited in an interest- bearing account(s) and unused proceeds did not remain invested, the compliance review staff will prepare a cash flow analysis at the time of the final compliance review to determine the estimated amount of interest that would have been earned had funds been invested. The SAU will be required to pay the amount of estimated net interest that would have been earned had project funds been appropriately invested.C. SAUs are required to have calculated the amount of arbitrage rebate attributed to the investment of project funds that is currently due or estimated to be due to the Internal Revenue Service prior to the final compliance review. Amounts due or payable to the Internal Revenue Service may be deducted from amounts required to be returned in accordance with Section 13. When an SAU selects the two-year spending exception to rebate option pursuant to Section 1.148-7 of the U.S. Treasury regulations, the amount of interest reinvested in the construction project will be deducted from the amount of project costs to be subsidized. At the time the bond has been issued an SAU must notify the Department that it has selected the two-year spending exception to rebate option and shall provide documentation that proceeds have been allocated to expenditures in accordance with the schedule pursuant to Section 1.148-7 of the U.S. Treasury regulations.D. Interest earned from investment of project funds shall be determined at the time of the final compliance review of the project by the compliance review staff.E. Interest earned as a result of the investment of insurance proceeds, gifts or federal funds available to the project may be retained by the SAU and used for school purposes.F. Subject to a deduction allowed for the interest expense of State / Local BANs, net interest earned on the project funds, including those held in an SAU's investment account(s), shall be returned upon completion of the final compliance review and be applied as school construction audit recoveries in accordance with 30-A M.R.S.A. §6006-F(2)(F) except when the two-year spending exception to rebate option has been selected pursuant to paragraph C above. The deduction allowed for the interest expense of State/Local BANs shall not exceed the income earned on State / Local BANs and bonds except as otherwise allowed by this Rule.G. Net interest earned on the local-only share determined at the time of the final compliance review may be retained by the SAU but used for school purposes.H. Interest earned between the time of the final compliance review and payment of the final settlement may be retained by the SAU but used for school purposes.5.Temporary Borrowing or Bond Anticipation Notes (BAN)A. Temporary borrowing prior to the issuance of bonds shall be accomplished as follows: (1) On a written, competitive basis at the lowest interest rate available, or by a method approved in writing by the Commissioner.(2) An SAU may borrow up to the estimated amount necessary to finance start-up costs until bonds are sold in accordance with the bond sale date provided in the Certificate of Final Funding Approval issued by the Commissioner, with the understanding that unused note proceeds shall be kept invested in accordance with subsection 4 paragraph A of this Section.B. An SAU shall include in the Concept Approval budget, as a local expense, any anticipated interest cost of temporary borrowing that exceeds anticipated interest income.C. In the event the interest cost of temporary borrowing exceeds the interest income: (1) a detailed accounting of investments and costs shall be prepared by the compliance review staff at the time of the final compliance review;(2) any interest cost of temporary borrowing that exceeds interest income shall be the responsibility of the SAU;(3) in exceptional circumstances and upon approval of the Commissioner, the net interest cost of temporary borrowing may be included in the SAU's a. state/local allocation as a debt service cost, orb. as an audit adjustment to the SAU's subsidy calculation.D. Interest costs of temporary borrowing shall be determined at the time of the final compliance review of the project by the compliance review staff.E. Documentation of principal and interest payments on loans and BANs shall be submitted to the Facilities Team with the monthly report required by Section 10, subsection 5 of these rules.6.Interest LostA. Estimated interest lost because of the use of non-project local funds for incidental start- up costs, following placement of the project on the Approved Projects List and prior to receipt of temporary borrowing proceeds, will be determined by the compliance review staff at the time of the final compliance review of the project.B. The amount of interest lost will be deducted from interest earned on the investment of project funds and may be retained by the SAU and used for school purposes only.C. This does not apply to projects during the period of interest-only interim local financing as defined in 20-A M.R.S.A. §15905(7).7.Disposition of Unused Bond ProceedsA. Within thirty (30) days of the date of the final compliance review letter, and upon agreement to the final compliance review, the balance of the unused bond proceeds identified after final close out of the SAU's project shall be deposited in a segregated, interest-bearing escrow account.B. After the final compliance review an SAU shall use all of the unused bond proceeds, and any accrued interest earned that is not subject to arbitrage rebate under the Internal Revenue Code, to pay down the debt service costs on subsidized school construction bonds.C. An SAU shall inform the compliance review staff of the amount deposited in a segregated account, the date that net proceeds from the account can first be used to pay down debt service costs, and an estimate of the amount of funds (principal and interest) in the account that is expected on that date.D. Unused bond proceeds of $5,000 (five thousand dollars) or less are considered de minimis amounts and will not result in a reduction of the debt service subsidy.8.Non-Allowable ExpendituresNon-allowable expenditures shall be the financial responsibility of the SAU and will be determined at the time of the final compliance review by the Facilities Team and compliance review staff.
9.Interest-Only Interim Local FinancingA. The State Board may accelerate the dates on which it grants Concept Approval and Design and Funding Approval for a school construction project that has been placed on the Approved Projects List of the State Board, on the condition that the SAU provides interest-only interim local financing for the project.B. The period of interest-only interim local financing must be determined by the State Board at the time Concept Approval is granted for a project and must be based on the time difference between the date that Final Funding Approval is expected to be granted on an accelerated basis and the date that Final Funding Approval would have been expected to be granted in the normal course.C. Interest-only interim local financing shall be in accordance with 20-A M.R.S.A. §15905(7).05-071 C.M.R. ch. 61, § 11