5/17/10

Last Friday, the Texas Attorney General posted an "All Bond Counsel" letter on the "Ability of a School District to make Payments on Bonds from Funds Other than a Tax Levied for the Payment of Debt Service."  The "All Bond Counsel" letter responded to three questions on this topic contained in an August 17, 2009 letter from Commissioner of Education Robert Scott.

The Summary section of the Texas Attorney General letter is excerpted below.

“Maintenance taxes may not be levied to pay debt service for school bonds issued under section 45.001. Section 45.1 05( c) authorizes surplus maintenance taxes not needed for the support and maintenance of a school district to be used to pay school bond debt service so long as the board of trustees determines that the payment is a necessary purpose in the conduct of the school. A district's board of trustees also has discretion pursuant to section 45.1 05(c) to use other local sources of revenues not earmarked for a particular purpose or otherwise restricted by law to pay bond debt service if the board determines such use of the revenues is necessary in the conduct of the district's schools.

School districts may use the basic allotment under subchapter B of chapter 42 of the Education Code to pay school district bond debt service pursuant to section 45.1 05( c) so long as the board determines that paying debt service on existing school district bonds is a purpose necessary in the conduct of the school. Under subchapter C of chapter 42 of the Education Code and in accordance with the rules established by the State Board of Education, school districts may use indirect cost allotments to pay debt service on bonds to the extent that the capital improvements being financed with those bonds are related to the specific program for which the indirect allotment is being awarded.”

School district officials need to carefully read the letter in its entirety to understand how the various details regarding ineligible fiscal sources for payment of bond obligations may affect the district.  School officials should consult with their financial advisor and bond counsel on specific issues covered in the letter that relate to financial management practices of the district. 

To read the entire "All Bond Counsel" letter click on the link below. 

http://www.oag.state.tx.us/opin/abc_letters/20100514abc.pdf