19 Tex. Admin. Code § 61.1032 – Instructional Facilities Allotment

(a) Definitions. The following definitions apply to the instructional facilities allotment governed by this section:
1. (1) Instructional facility--real property, an improvement to real property, or a necessary fixture of an improvement to real property that is used predominantly for teaching the curriculum required by Texas Education Code (TEC), §28.002.
2. (2) Noninstructional facility--a facility that may occasionally be used for instruction, but the predominant use is for purposes other than teaching the curriculum required by TEC, §28.002.
3. (3) Necessary fixture--equipment necessary to the use of a facility for its intended purposes, but which is permanently attached to the facility such as lighting and plumbing.
4. (4) Debt service--as used in this section, debt service shall include payments of principal and interest on bonded debt or the amount of a payment under an eligible lease-purchase arrangement.
5. (5) Allotment--represents the amount of eligible debt service that can be considered for state aid. The total allotment is comprised of a combination of state aid and local funds. The state share and local share are adjusted annually based on changes in average daily attendance, property values, and debt service.
(b) Application process. A school district must complete an application requesting funding under the Instructional Facilities Allotment (IFA). The commissioner of education may require supplemental information to be submitted at an appropriate time after the application is filed to reflect changes in amounts and conditions related to the debt. The application shall contain at a minimum the following:
1. (1) a description of the needs and projects to be funded with the debt issue or other financing, with an estimate of cost of each project and a categorization of projects according to instructional and noninstructional facilities or other uses of funds;
2. (2) a description of the debt issuance or other financing proposed for funding, including a projected schedule of payments covering the life of the debt;
3. (3) an estimate of the weighted average maturity of bonded debt; and
4. (4) drafts of official statements or contracts that fully describe the debt, as soon as available.
(c) District eligibility. All school districts legally authorized to enter into eligible debt arrangements as defined in subsection (d) of this section are eligible to apply for an IFA.
(d) Debt eligibility. In order to be eligible for state funding under this section, a debt service requirement must meet all of the criteria of this subsection.
1. (1) The debt service must be an obligation of the school district which is entered into pursuant to the issuance of bonded debt under TEC, Chapter 45, Subchapter A; an obligation for refunding bonds as defined in TEC, §46.007; or an obligation under a lease-purchase arrangement authorized by Local Government Code, §271.004.
2. (2) Application for funding of bonded debt service must be received at the Texas Education Agency (TEA) prior to the passage of an order by the school district board of trustees authorizing the bond issuance.
3. (3) Application for funding of lease-purchase payments must be received at TEA prior to the passage of an order by the school district board of trustees authorizing the lease-purchase arrangement.
4. (4) Eligible bonded debt must have a weighted average maturity of at least eight years. The term of a lease-purchase agreement must be for at least eight years. For purposes of this section, a weighted average maturity shall be calculated by dividing bond years by the issue price, where "bond years" is defined as the product of the dollar amount of bonds divided by 1,000 and the number of years from the dated date to the stated maturity, and "issue price" is defined as the par value of the issue plus accrued interest, less original issue discount or plus premium.
5. (5) Funds raised by the district through the issuance of bonded debt must be used for an instructional facility purpose as defined by TEC, §46.001. The facility acquired by entering into a lease-purchase agreement must be an instructional facility as defined by TEC, §46.001.
6. (6) If the bonded debt is for a refunding or a combination of refunding and new debt, the refunding portion must meet the same eligibility criteria with respect to dates of first debt service as a new issue as defined by TEC, §46.003(d)(1).
7. (7) An amended application is required for any eligible refunding bonds, regardless of whether a complete or partial refunding is accomplished. Refunding bonds must also meet the following three criteria as defined by TEC, §46.007:
  1. (A) Refunding bonds may not be called for redemption earlier than the earliest call date of the bonds being refunded.
  2. (B) Refunding bonds must not have a maturity date later than the final maturity date of the bonds being refunded.
  3. (C) The refunding of bonds must result in a present value savings, which is determined by computing the net present value of the difference between each scheduled payment on the original bonds and each scheduled payment on the refunding bonds. Present value savings shall be computed at the true interest cost of the refunding bonds.
8. (8) Certain other refinanced debt may be eligible for the funding under this subsection.
  1. (A) When a district issues a general obligation bond to acquire a facility that is the subject of an existing lease-purchase arrangement of the district, the transaction is considered a refinancing of the lease purchase for purposes of continued participation in the IFA program.
  2. (B) If a lease purchase in the IFA program is refinanced with a general obligation bond at a present value savings and without extension of the original term of the lease-purchase agreement, the debt shall remain part of the IFA program.
  3. (C) Any portion of a bond issue that refinances a portion of a lease-purchase arrangement that was originally ineligible for IFA funding shall remain ineligible. Ineligible debt is refunded bonds that fail to meet the criteria under TEC, §46.007, and/or bonds used for purposes not meeting the definition of qualified projects as described in TEC, §46.001 and §46.002.
  4. (D) Any portion of a bond issue that refinances a portion of an original lease-purchase arrangement that was eligible for IFA consideration but exceeded the IFA limit shall be eligible for consideration in future funding cycles.
  5. (E) If a lease purchase that is not in the IFA program is refinanced with a general obligation bonded debt, the bonded debt shall gain eligibility for the IFA by the terms of that program. Any Interest and Sinking (I&S) fund tax effort associated with the bonded debt payments may be counted for purposes of computing the IFA. To be considered for IFA funding, the district shall be required to apply to the program as a new debt.
  6. (F) If any portion of a maturity of an IFA bonded debt is refunded at a present value cost or with an extension of the term, that portion of the debt shall be removed from eligibility for further IFA tax effort equalization.
  7. (G) Debt that is refinanced in a manner that disqualifies it for eligibility for funding within the IFA program shall be treated as new bonded debt at the time of issuance for the purpose of funding consideration pursuant to the Existing Debt Allotment (EDA).
9. (9) In addition to I&S fund taxes collected in the current school year, other district funds budgeted for the payment of bonds may be eligible for the IFA program for the purpose of meeting local share requirements pursuant to Texas Education Code, Chapter 46.
  1. (A) Funds budgeted by a district for payment of eligible bonds may include I&S fund taxes collected in the 1999-2000 school year or a later school year in excess of the amount necessary to pay the district's local share of debt service on bonds in that year, provided that the taxes were not used to generate other state aid.
  2. (B) Funds budgeted by a district for payment of eligible bonds may include Maintenance and Operations (M&O) taxes collected in the 1999-2000 school year or a later school year that are in excess of amounts used to generate other state aid.
  3. (C) The commissioner will provide each district with information about what tax collections were not equalized by state assistance in the preceding school year and worksheets to enable districts to calculate tax collections that will not receive state assistance in a current school year.
  4. (D) Districts must inform the commissioner of amounts, if any, to be applied to the IFA local share requirement, if such contributions are derived from current or preceding year tax collections not equalized by state assistance.
10. (10) If a district issues debt that requires the deposit of payments into a mandatory I&S fund or debt service reserve fund, the deposits will be considered debt payments for the purpose of the IFA if the district's bond covenant calls for the deposit of payments into a mandatory and irrevocable fund for the sole purpose of defeasing the bonds or if the final statement stipulates the requirements of the I&S fund and the bond covenant.
11. (11) I&S fund taxes will be attributed first to satisfy the local share requirement of eligible EDA debts, second to satisfy the local share requirements of any IFA debts, and lastly to excess taxes that may raise the limit for the EDA program in a subsequent biennium if collected in the second year of a state fiscal biennium.
12. (12) When considering application for funding, a debt which meets the eligibility requirements of the EDA will be removed from consideration under the IFA program to the extent that the debt may be funded by the EDA up to the limits that apply for that program during the biennium in which EDA funding would first be available.
(e) Biennial limitation on access to allotment. The cumulative amount of new debt service for which a district may receive approvals for funding within a biennium shall be the greater of $100,000 per year or $250 per student in average daily attendance per year. A district may submit multiple applications for approval during the same biennium. Timely application before executing the bond order for bonds or authorizing the order for a lease-purchase agreement must be made to ensure eligibility of the debt for program participation. The calculation of the limitation on assistance shall be based on the highest annual amount of debt service that occurs within the state fiscal biennium in which payment of state assistance begins.
(f) Additional applications. For previously awarded debt, increases in a district's debt allotment to pay for increases in debt service payment requirements in subsequent biennia must receive approval through one or more additional application(s). The portion of any increase in eligible, qualified debt service that may be funded in subsequent biennia is the amount that exceeds any previously awarded and approved allotments, within the biennial limitation on funding as calculated at the time of approval of the additional applications.
(g) Finality of award. Awards of assistance under TEC, Chapter 46, will be made based on the information available to TEA at the deadline for receipt of applications for that application cycle. Changes in the terms of the issuance of debt, either in the length of the payment schedule or the applicable interest rate, that occur after the time of the award of assistance will not result in an increase in the debt service considered for award. Any reduction in debt service requirements resulting from changes in the terms of issuance of debt shall result in a reduction in the amount of the award of assistance.
(h) Data sources.
1. (1) For purposes of determining the limitation on assistance and prioritization, the projected average daily attendance as adopted by the legislature for appropriations purposes shall be used.
2. (2) For purposes of prioritization, the final property values certified by the Comptroller of Public Accounts for the tax year preceding the year in which assistance is to begin shall be used. If final property values are unavailable, the most recent projection of property values shall be used.
3. (3) For purposes of both the calculation of the limitation on assistance and prioritization, the commissioner may consider, prior to the deadline for receipt of applications for that application cycle, adjustments to data values determined to be erroneous.
4. (4) For purposes of prioritization, enrollment increases over the previous five years shall be determined using Public Education Information Management System (PEIMS) submission data available at the time of application.
5. (5) For purposes of prioritization, outstanding debt is defined as voter-approved bonded debt or lease-purchase debt outstanding at the time of the application deadline.
6. (6) All final calculations of assistance earned shall be based on property values as certified by the Comptroller for the preceding school year, and the final average daily attendance for the current school year.
(i) Allocation of debt service between qualified and nonqualified projects. Debt service shall be allocated among qualified and nonqualified purposes and among eligible and ineligible categories of debt. The method used for allocation among qualified and nonqualified purposes shall be on the basis of pro rata value of the instructional facility versus the noninstructional purposes over the life of the debt service, unless a different basis is indicated in the bond order. The method of allocation of debt service between eligible and ineligible categories must be the same method selected for approval by the Attorney General.
(j) Payments and deposits.
1. (1) Payment of state assistance shall be made as soon as practicable after September 1 of each year. No payments shall be made until the execution of the bond order or the authorization of the lease-purchase agreement, whichever is applicable, has occurred.
2. (2) Funds received from the state for bonded debt must be deposited to the interest and sinking fund of the school district and must be considered in setting the tax rate necessary to service the debt.
3. (3) Funds received from the state for lease-purchase agreements must be deposited to the general fund of the district and used for lease-purchase payments.
4. (4) A final determination of state assistance for a school year will be made using final attendance data and property value information as may be affected by TEC, §42.257. Additional amounts owed to districts shall be paid along with assistance in the subsequent school year, and any reductions in payments shall be subtracted from payments in the subsequent school year.
5. (5) As an alternative method of adjustment of payments, the commissioner may increase or decrease allocations of state aid under TEC, Chapter 42, to reflect appropriate increases or decreases in assistance under TEC, Chapter 46.
(k) Approval of Attorney General required. All bond issues and all lease-purchase arrangements must receive approval from the Attorney General before a deposit of state funds will be made in the accounts of the school district.
(l) Deadlines.
1. (1) The commissioner of education shall conduct an annual application cycle with a deadline of June 15 or the next working day after June 15 every year based on the availability of appropriations for the purpose of awarding new allotments. If no funding is available, the commissioner shall cancel the June 15 deadline. The commissioner may conduct more than one application cycle to allocate funding appropriated for a fiscal year.
2. (2) If funds are still available after conducting the June 15 annual cycle, the commissioner shall announce the TEA's intention to have an additional application cycle no less than 90 days prior to the application deadline.
3. (3) The commissioner shall establish the relevant limit on the date of first debt service payment from property taxes for eligible bonded debt that will be considered for funding in the announced application cycle.
4. (4) An application received after the deadline shall be considered a valid application for the subsequent period unless withdrawn by the submitting district before the end of the subsequent period.
5. (5) If the execution of the bond order or the authorizing of a lease-purchase agreement has not taken place within 180 days of the deadline for the current application cycle, the TEA shall consider the application withdrawn.
6. (6) The school district may not submit an application for bonded debt prior to the successful passage of an authorizing proposition. The election to authorize the debt must be held prior to the close of the application cycle. An application for a lease-purchase agreement may not be submitted prior to the end of the 60-day waiting period in which voters may petition for a referendum, or until the results of the referendum, if called, approve the agreement.
(m) Prioritization and notice of award. Upon close of the application cycle, all eligible applications shall be ranked in order of property wealth per student in average daily attendance. State assistance will be awarded beginning with the district with the lowest property wealth and continue until all available funds have been utilized. Each district shall be notified of the amount of assistance awarded and its position in the rank order for the application cycle. A district's wealth per student may be reduced if any or all of the following criteria are met.
1. (1) A district's wealth per student is first reduced by 10% if the district does not have any outstanding debt at the time the district applies for assistance.
2. (2) A district's wealth per student is next reduced if a district has had substantial student enrollment growth in the preceding five-year period. For this purpose, the district's wealth per student is reduced:
  1. (A) by 5.0%, if the district has an enrollment growth rate in that period that is 10% or more but less than 15%;
  2. (B) by 10%, if the district has an enrollment growth rate in that period that is 15% or more but less than 30%; or
  3. (C) by 15%, if the district has an enrollment growth rate in that period that is 30% or more.
3. (3) If a district has submitted an application with eligible debt and has not previously received any assistance due to a lack of appropriated funds, its property wealth for prioritization shall be reduced by 10% for each biennium in which assistance was not provided. The reduction is calculated after reductions for outstanding debt and enrollment are completed, if applicable. This reduction in property wealth for prioritization purposes is only effective if the district actually entered the proposed debt without state assistance prior to the deadline for a subsequent cycle for which funds are available.
(n) Bond taxes. A school district that receives state assistance must levy and collect sufficient eligible taxes to meet its local share of the debt service requirement for which state assistance is granted. Failure to levy and collect sufficient eligible taxes shall result in pro rata reduction of state assistance. The requirement to levy and collect eligible taxes specified in this subsection may be waived at the discretion of the commissioner for a school district that must maintain local maintenance tax effort in order to continue receiving federal impact aid.
(o) Exclusion from taxes. The taxes collected for bonded debt service for which funding under TEC, Chapter 46, is granted shall be excluded from the tax collections used to determine the amount of state aid under TEC, Chapter 42. For a district operating with a waiver as described in subsection (n) of this section, the amount of the local share of the allotment shall be subtracted from the total tax collections used to determine state aid under TEC, Chapter 42.
(p) Calculation of bond tax rate (BTR) for lease-purchase arrangements. The value of BTR in the formula for state assistance for a lease-purchase arrangement shall be calculated based on the lease-purchase payment requirement, not to exceed the relevant limitations described in this section. The lease-purchase payment shall be divided by the guaranteed level (FYL), then by average daily attendance (ADA), then by 100. The value of BTR shall be subtracted from the value of district tax rate (DTR) as computed in TEC, §42.302, prior to limitation imposed by TEC, §42.303.
(q) Continued treatment of taxes and lease-purchase payments. Taxes associated with bonded debt may not be considered for state aid under TEC, Chapter 42. Bonded debt service or lease-purchase payments that were excluded from consideration for state assistance due to prioritization or due to the limitation on assistance may be considered for state assistance in subsequent biennia through additional applications. A modified application may be provided for previously rejected debt service or lease-purchase payments.
(r) Variable rate bonds. Variable rate bonds are eligible for state assistance under the IFA. For purposes of calculating the biennial limitation on access to the allotment, the payment requirement for a variable rate bond shall be valued at the minimum amount a district must budget for payment of interest cost and the scheduled minimum mandatory redemption amount, if applicable. For purposes of calculating state assistance under TEC, Chapter 46, the lesser of the actual payment or the limitation on the allotment shall be used. A district may exercise its ability to make payments in amounts in excess of the minimum, but the excess amount shall not be used in determining the value of BTR or in the calculation of state assistance under TEC, Chapter 46, in that year.
(s) Fixed-rate bonds. Computation for fixed-rate bonds shall be based on published debt service schedules as contained in the official statement. Prepayment of a bond, either through an early call provision or some other mechanism, shall not increase the state's obligation or the computed state aid pursuant to the IFA. To the extent that prepayments reduce future debt service requirements, the computation of state aid shall also be appropriately adjusted.
(t) Reports required. The commissioner shall require such information and reports as are necessary to assure compliance with applicable laws. The commissioner shall require immediate notification by the district of relevant financing activities such as refunding or refinancing of bond issues, renegotiation of lease-purchase terms, change in use of bond proceeds, or other actions taken by the district that might affect state funding requirements.

Source Note:The provisions of this §61.1032 adopted to be effective October 13, 1997, 22 TexReg 9887; amended to be effective December 27, 1998, 23 TexReg 12916; amended to be effective January 8, 2001, 26 TexReg 194; amended to be effective May 16, 2002, 27 TexReg 4013.