S.C. Code Ann. § 6-25-115 – Financing pools and construction notes

(A) A joint system organized for the purpose of creating a financing pool may issue from time to time its construction notes for the purpose of creating a financing pool and providing funds to defray the cost of administration of the financing pool and the costs of issuance of the construction notes. The principal of, premium if any, and the interest on an issue of construction notes must be payable solely from the proceeds of the construction notes, earning on the proceeds, the proceeds of bonds issued to the government by members of the joint system, financing agreements between the joint system and its members, and such funds and accounts of the joint system as provided by the resolution of the commission authorizing the issuance of such issue of construction notes or a trust agreement securing the issue of construction notes. Each issue of construction notes may be sold at public or private sale. The construction notes may be sold at a price, and must bear interest at a rate, as may be determined by the commission of the joint system. The construction notes of each issue must be dated and must mature in amounts and at times not exceeding two years from their respective dates, as may be determined by the commission of the joint system, and may be made redeemable before maturity at a price and under terms and conditions as may be fixed by the commission of the joint system prior to the issuance of the construction notes. The commission of the joint system shall determine the form and the manner of execution of the construction notes, including any interest coupons to be attached to them, and shall fix the denomination of the construction notes and the place of payment of principal and interest, which may be at any bank or trust company within or without the State. In case any officer whose signature or a facsimile of whose signature appears on any construction note or coupons ceases to be an officer before the delivery of the construction notes, the signature of the facsimile is nevertheless valid and sufficient for all purposes the same as if he had remained in office until the delivery. The commission of the joint system may also provide for the authentication of the construction notes by a trustee or fiscal agent. The construction notes may be issued in bearer or in fully registered form, or both, as the commission of the joint system may determine.
(B) The proceeds of the construction notes of each issue may be used solely for the purposes for which the construction notes are issued, and must be disbursed in a manner and under restrictions, if any, as the commission of the joint system may provide in the resolution authorizing the issuance of the construction notes or in any trust agreement securing them. The joint system may also provide for the replacement of any construction notes which have become mutilated or have been destroyed or lost.
(C) The proceeds of the construction notes must be applied solely to the costs of issuance thereof, the cost of administration of the joint system, to capitalized interest on the notes, and to create a financing pool.
(D) Monies in a financing pool may be loaned to members of the joint system upon such terms and conditions as are set forth by the resolution of the commission authorizing construction notes issued to provide funds for the financing pool or a trust agreement securing the issue of construction notes, provided, however, that the loan made from the financing pool may be only made upon the delivery by the borrower of such funds of a letter of commitment from the government to provide permanent financing for the capital project to be initially financed by the loan.
(E) All construction notes must be special obligations of the joint system by which they are issued, and the full faith, credit, and taxing power of neither this State nor any of its political subdivisions may be pledged for these notes. All construction notes shall include a legend substantially similar to the following:
THIS NOTE IS A SPECIAL AND LIMITED OBLIGATION OF (NAME OF JOINT SYSTEM), A BODY CORPORATE AND POLITIC OF THE STATE OF SOUTH CAROLINA. THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THIS NOTE IS NOT PAYABLE FROM THE GENERAL FUNDS OF THE (NAME OF JOINT SYSTEM), NOR DOES IT CONSTITUTE A LEGAL OR EQUITABLE PLEDGE, CHARGE, LIEN, OR ENCUMBRANCE UPON ANY OF ITS PROPERTY OR UPON ANY OF ITS INCOME, RECEIPTS, OR REVENUES, EXCEPT THE FUNDS WHICH ARE PLEDGED UNDER THE RESOLUTION AUTHORIZING THE ISSUANCE OF THIS NOTE OR THE TRUST AGREEMENT SECURING THIS NOTE. THIS NOTE DOES NOT CONSTITUTE A DEBT, LIABILITY, OR OTHER OBLIGATION OF THE STATE OF SOUTH CAROLINA, OR ANY POLITICAL SUBDIVISION OF IT. THE (NAME OF JOINT SYSTEM) IS NOT OBLIGATED TO PAY THIS NOTE OR THE INTEREST HEREON EXCEPT FROM THE REVENUES, FUNDS, AND ASSETS PLEDGED THEREFOR, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF SOUTH CAROLINA. THE (NAME OF JOINT SYSTEM) OR ITS MEMBER ENTITIES IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THIS NOTE. NO HOLDER OF THIS NOTE HAS THE RIGHT TO COMPEL THE EXERCISE OF THE TAXING POWER BY THE STATE OR ANY POLITICAL SUBDIVISION OF IT OR THE FORFEITURE OF ANY OF ITS PROPERTY IN CONNECTION WITH ANY DEFAULT.
(F) Construction notes may be issued under provisions of this chapter without obtaining the consent or approval of the State or any political subdivision or any agency, commission, or instrumentality of them, but such construction notes may not be issued without the prior approval of a majority of the commissioners of the joint system present and voting at a duly called meeting of it. No member is liable for any payments in respect of any construction notes issued by a joint system except with the approval of the governing body of the member, by resolution or ordinance of the governing body of the member.
(G) In the discretion of the commission of the joint system, any construction notes issued under the provisions of this chapter may be secured by a trust agreement by and between the joint system and a corporate trustee, which may be any 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 construction notes may contain provisions for protecting and enforcing the rights and remedies of the holders of the construction notes 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 holders of construction notes. The trust agreement or the resolution providing for the issuance of the construction notes may contain covenants including, but not limited to, the following:
1. (1) the pledge of the proceeds of the construction notes, earnings on the proceeds, the proceeds of bonds issued to the government by members of the joint system, agreements between the joint system and its members, and the funds and accounts of the joint system;
2. (2) the terms and conditions of loans to be made from the financing pool;
3. (3) the setting aside of reserves and the investment, regulation, and disposition of the reserves;
4. (4) the custody, collection, securing, investment, and payment of any monies held for the payment of construction notes;
5. (5) limitations or restrictions on the purposes to which the proceeds of sale of construction notes then or thereafter issued may be applied;
6. (6) limitations or restrictions on the issuance of additional construction notes, the terms upon which additional construction notes may be issued and secured, or the refunding of outstanding or other construction notes;
7. (7) the procedure, if any, by which the terms of any contract with holders of construction notes may be amended, the percentage of construction notes the holders of which must consent to, and the manner in which the consent may be given;
8. (8) events of default and the rights and liabilities arising on default, the terms and conditions upon which construction notes issued under this chapter become or may be declared due before maturity, and the terms and conditions upon which the declaration and its consequences may be waived;
9. (9) the retention or employment of financial advisors, attorneys, independent auditors, and other technical consultants;
10. (10) provisions for insurance and for accounting reports and the inspection and audit of them;
11. (11) conditions under which the construction notes may be defeased or redeemed.