360 Attorneys. 19 Offices. 1 Firm. Southeastern Strong.
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Index
• Role of Bond Counsel
• General Obligation Bonds
› (a) Bonds Subject to 8% Constitutional Debt Limit
› (b) Bonds Approved in a Referendum
› (c) Bonds Issued under Special Federal Programs
• (i) Qualified Zone Academy Bonds
• (ii) Qualified Energy Conservation Bonds
• (iii) Qualified School Construction Bonds
• (iv) Build America Bonds
• General Obligation Refunding Bonds
• General Obligation Bond Anticipation Notes
• Tax Anticipation Notes
• Acquisition, Use And Security Agreements
• Installment Purchase Revenue Bonds
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Role of Bond Counsel
• The role of Bond Counsel includes responsibility for individual
transactions and participation in long term planning.
Specifically, duties include:
• (1) Prepare Resolution(s) for adoption by the Board of
Trustees or Board of Education of the school district and
other matters necessary or appropriate to the authorization,
issuance and delivery of the debt and coordinate the
authorization and execution of such documents;
• (2) Review legal issues relating to the structure of the debt;
• (3) Prepare the Preliminary Official Statement, the Final
Official Statement, Official Notice of Sale, and Summary
Notice of Sale for the debt;
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Role of Bond Counsel
• (4) If the debt is not publicly traded, (3) above
would be revised to Request for Proposals and
Summary Notice of Sale for the debt;
• (5) Attend meetings and conferences (including
telephone conferences and zoom meetings) with
school district officials;
• (6) Work closely with the financial advisor;
• (7) Assist with the preparation of materials for
and participate in rating calls with rating
agencies, if any;
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Role of Bond Counsel
• (8) Draft required certificates and closing papers
including the federal tax certificate with respect to the
debt and coordinate the execution of such
documents;
• (9) Subject to the completion of proceedings to our
satisfaction, render our legal opinion regarding the
validity and binding effect of the debt, the source of
payment and security for the debt and the treatment
of interest paid on the debt; and
• (10) Assist with the distribution of costs of issuance
based upon invoices approved by the school district.
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General Obligation Bonds
Subject to 8% Constitutional Debt Limit
• Description. Article X, Section 15 of the South Carolina Constitution
permits school districts to incur general obligation debt in an
amount not exceeding 8% of the assessed value of all taxable
property of the school district. This limit applies to debt incurred
after November 30, 1982.
• Pursuant to Section 59, Title 71 of the Code of Laws of South
Carolina 1976, as amended (the School Bond Act), a school district
has full authority to issue debt up to its 8% constitutional debt limit;
a school board determines the maturity schedule i.e. how large
payments will be and timing of those payments. Upon notice, the
auditor and treasurer of a county are required to levy and collect
sufficient tax millage to make debt service payments. The full faith,
credit and taxing power of the school district are pledged for
repayment.
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General Obligation Bonds
• A school board has the flexibility to select repayment schedules
which best fit its needs. For example, a school board may
authorize deferral of principal payments and make payments of
interest only for up to four years which causes payments to be less
in the first years. As an alternative, a school board may select
rapid repayment to maximize the recapture of its 8% debt
capacity and to save interest cost.
• As part of its long term financing plan, the School District issues an
annual general obligation bond(s) subject to its 8% constitutional
debt limit in the approximate amount of $20,000,000 to fund
annual capital expenditures and maintenance.
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General Obligation Bonds
Approved in a Referendum
• Description. Upon favorable results of a referendum, a
school district is authorized to issue debt in an amount in
excess of its 8% constitutional debt limit. In ordering a
referendum, the school district has the authority to
determine:
› (1) the amount of bonds to be authorized by the voters;
› (2) the date (and day of the week) of the referendum – Tuesday,
Saturday, or on a day upon which other special or regular
elections are being conducted; and
› (3) the form of the question to be presented to voters – general
vs. specific; flexible vs. "tied down."
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General Obligation Bonds
• In structuring debt approved in a referendum, the
school district has flexibility to fit the repayment of the
debt into financial projections or millage limitations set
by the board.
• The financing plan in connection with the School
District’s successful referendum held on November 5,
2019, includes the possibility of a second phase of
referendum projects in the future with no millage
increase.
• All debt approved by a referendum must be issued
within five years of the date of the referendum.
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Bonds Issued Under Special Federal Programs
• Qualified Zone Academy Bonds
• Qualified Energy Conservation Bonds
• Qualified School Construction Bonds
• Build America Bonds
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General Obligation Refunding Bonds
• Description. General obligation refunding bonds are
bonds that are issued to refund (refinance)existing
debt of a school district. Just like general obligation
bonds, they are secured by the full faith, credit and
taxing power of a school district. The bonds are issued
to produce an interest savings over the life of the
bonds. Whether such bonds are subject to a school
district’s constitutional debt limit is determined by
whether the original bonds were subject to the 8%
constitutional debt limit or referendum approved. In a
refunding bond issue, it is possible to combine in one
issue debt that is both 8% and referendum. It is also
possible to issue new money debt in combination with
refunding debt.
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General Obligation Bond Anticipation Notes
• Description. Short term borrowing of a year or less. A
school district makes a pledge to issue sufficient bonds
to pay principal and interest (if necessary) on the bond
anticipation note. Bond anticipation notes may be
paid from bonds, can be rolled over into another bond
anticipation note or paid from otherwise available
funds.
• Advantages of bond anticipation notes include
flexibility and use of borrowed monies without necessity
of immediately imposing millage on taxpayers.
• The School District does not presently have any
outstanding bond anticipation notes.
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Tax Anticipation Notes
• Description. School districts are also authorized to issue tax
anticipation notes within a fiscal year which pledge the
receipt of ad valorem taxes as payment therefor. The
purpose of a tax anticipation note is to provide cash flow
until property taxes are received. Tax anticipation notes
must be repaid no later than the following April 14 or 15,
depending on whether it is a leap year, after issuance.
• Series 2020 Note. The School District issued its $14,300,000,
Tax Anticipation Note, Series 2020, dated September 29,
2020 (the “2020 Note”) through the South Carolina
Association of Governmental Organizations (“SCAGO”) 2020
TAN Program. The School District has been issuing its Tax
Anticipation Notes through SCAGO since 2002.
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Tax Anticipation Notes
• SCAGO
› SCAGO is a not-for-profit corporation established in
2002 for the purpose of creating efficient, cost effective
financing programs for South Carolina school districts.
› SCAGO’s first program was the tax anticipation note
program in 2002.
• Each School district issues its own tax anticipation note and
SCAGO sells the notes as one issue
› In SCAGO programs, participatng school districts
receive the benefit of low interest rates, pro rated costs
of issuance and ease and convenience.
› The School District has been issuing its Tax Anticipation
Notes through SCAGO since 2002.
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Tax Anticipation Notes
• Series 2021 Notes. The School District issued its
$80,000,000 Tax Anticipation Notes, Series 2021
(the “2021 Notes”) on February 4, 2021, the
proceeds of which are being used for School
District operations, to retire the 2020 Note,
which was retired on February 26, 2021, and to
pay the March 1, 2021, debt service payments
on its outstanding general obligation bonds.
The true interest cost on the 2021 Notes is
0.067%.
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Acquisition, Use and Security Agreement
• Description. In this type of financing, a school district
enters into an acquisition, use and security agreement
for equipment or a guaranteed energy savings
contract which will not count against a school district’s
8% constitutional debt limit. This debt is similar to a
lease purchase, but a school district has the option of
making acquisition payments from its general fund or
through the issuance of annual general obligation
bonds. By issuing a general obligation bond, the
repayment is reflected as debt service millage which is
not capped under Act 388. Each time an acquisition
payment is made, an undivided interest in the
equipment or the guaranteed energy savings contract
is purchased by the school district.
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Installment Purchase Revenue Bonds
• Description. In an installment purchase revenue bond
transaction, a nonprofit corporation (the
“Corporation”) is established for the sole purpose of
issuing the installment purchase revenue bonds. A
school district leases real property upon which the
financed facilities are located to the Corporation. A
school district and the Corporation enter into an
Installment Purchase and Use Agreement under which
a school district agrees to make annual installment
purchase payments in amounts sufficient to pay debt
service on the installment purchase revenue bonds. In
return for the annual purchase payments, the school
district would receive undivided ownership interests in
the financed facilities and the right to use the facilities.
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Installment Purchase Revenue Bonds
• In an installment purchase revenue
bond transaction, the school district
has the right to nonappropriate. If
such right is exercised, the facilities
would be partitioned between the
school district and the Corporation.
The amount borrowed in an
installment purchase revenue bond
transaction is not subject to the
school district’s 8% constitutional
debt limit.
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Installment Purchase Revenue Bonds
• Pursuant to Act 388, with respect to installment purchase
revenue bonds issued between August 31, 2006 and
December 31, 2006, the annual payment must be made
from the proceeds of general obligation bonds. This
procedure allows a school district’s payment to be reflected
in debt service millage, rather than operational millage. This
treatment of the millage can be a significant advantage to
a school district in light of the operations millage cap
established by the legislature.
• Pursuant to Act 388, installment purchase revenue bonds
became unavailable to school districts after December 31,
2006, except for installment purchase refunding revenue
bonds to refund outstanding installment purchase revenue
bonds. All of the installment purchase revenue bonds issued
on behalf of South Carolina school districts have been
refunded, including the School District.
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Installment Purchase Revenue Bonds
• In order to obtain the funds necessary to
make the installment payments, the School
District issues on an annual basis general
obligation bonds, the par amount of which
counts are subject to the School District’s 8%
constitutional debt limit. These bonds have
typically been issued through the SCAGO
General Obligation Debt Programs.
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