VPSA - General Pooled Bond Policy of the Authority

Legal Authority: This Policy is established pursuant to §22.1-171 A(5) of the Code of Virginia.

Purpose

This Policy establishes procedures of the Virginia Public School Authority (the "Authority") for the issuance of "Pooled Bonds" of the Authority to purchase general obligation school bonds or notes ("Local School Bonds") issued by counties, cities and towns of the Commonwealth of Virginia ("Local Issuers").

This Policy is issued in the interest of making available to all counties, cities and towns of the Commonwealth attractive credit terms and financing arrangements for financing capital projects for primary and secondary public schools and that such terms and arrangements are in the best interests of the Commonwealth as a whole.

This Policy is intended to supplement other policies, regulations, and directives issued by agencies and officers of the Commonwealth having administrative responsibilities for financing capital projects for primary and secondary public schools.

Applicability

This Policy shall apply to all Local Issuers proposing to sell and issue, to the Authority, Local School Bonds for the purpose of financing capital projects for primary and secondary public schools.

Findings

The Virginia Constitution directs the General Assembly to "provide for a system of free public elementary and secondary schools for all children of school age throughout the Commonwealth, and [to] seek to ensure that an educational program of high quality is established and continually maintained." (Virginia Constitution, Article VIII, Section 1).

The Authority was established pursuant to § 22.1-162 et seq. of the Code of Virginia (the "Enabling Act")to help address the needs of counties, cities and towns of the Commonwealth with respect to the financing of public school capital projects and to take appropriate steps to meet public school capital project needs of Local Issuers.

General Provisions

Pooled Bonds are repaid from the payments of principal and interest on Local Issuers' Local School Bonds purchased by the Authority with the proceeds of its Pooled Bonds and the proceeds from any sale of the Local School Bonds.

The Authority currently issues bonds for its Pooled Bond program under the 1997 Resolution. If any local issuer fails to make timely payment of debt service on its Local School Bonds and the application of the State Aid Intercept provisions mandated in § 15.2-2659 of the Code of Virginia does not remedy the deficiency, then the 1997 Resolution bonds will be payable from sum sufficient appropriations first from available funds in the Literary Fund and then from the Commonwealth's General Fund.

The Authority will strive to fund all capital school financing requests made of it through use of the Pooled Bond Program or other financing structure available to it under the applicable law. In the past, demand has been met through two Pooled Bond sales, one in the spring and one in the fall of each year. Amortization periods of up to 30 years may be considered as provided in the Enabling Act. The Authority will not guarantee that it will continue to be able to issue two Pooled Bond issues each year.

The Authority may issue, from time to time, intermediate-term Pooled Bonds under its 1997 Resolution to assist Local Issuers in financing certain capital projects for public schools with a short useful life. The minimum amount of any such application shall be $100,000. The intermediate-term Pooled Bonds shall be amortized over a period not to exceed the useful life of the project being financed.

Procedures for Authority Pooled Issues

Requests for Inclusion in Sale

  1. Localities interested in participating in a Pooled Bond issue may request inclusion in the next available sale by submitting the Pooled Bond Sale Application. The Authority will mail an electronic announcement to each Local School Superintendent, using the list provided by the Department of Education, with instructions for completing an application packet in advance of each Pooled Bond sale.
  2. The School Boards of Local Issuers requesting inclusion in the sale are required to pass resolutions authorizing application to the Virginia Public School Authority.
  3. Local Issuers requesting inclusion in the Pooled Bond financings are required to use certain standard bond documents prepared by the Authority and execute a Bond Sale Agreement.
  4. Local Issuers are permitted the opportunity to reduce the borrowing amount or to drop out of the sale completely at any time prior to the due date of the Bond Sale Agreement.
  5. Counties, cities and towns contemplating a Stand Alone financing for public school capital projects may apply to the Authority directly or as though participating in a pooled financing.

Investment Requirements

  1. The Authority shall require all Local Issuers taking part in the Pooled Bond Program to invest their bond proceeds in the Virginia State Non-Arbitrage Program or other investment vehicle designated by the Authority.
  2. The Authority's funds shall be invested by its Treasurer pursuant to § 22.1-169 of the Code of Virginia in accordance with the terms of the applicable Pooled Bond resolution. It is the objective of the Authority to preserve the principal of all funds invested while maintaining sufficient liquidity to enable it to meet all operational and debt service requirements and providing reasonable returns consistent with these constraints.

Terms

  1. Local School Bonds purchased by the Authority must constitute valid and binding general obligations of the respective Local Issuer for the payment of which its full faith and credit are irrevocably pledged, and all taxable property within the boundaries of the Local Issuer must be subject to the levy of an ad valorem tax, without limitation on rate or amount, for the payment of the Local School Bonds and the interest thereon.
  2. Each Local Issuer must represent, on or before the date of sale of the Authority's Pooled Bonds, that its governing body will have duly adopted the resolution, in the form provided to the Local Issuer and to the Local Issuer's bond counsel, prior to the sale date. The Local Issuer will also deliver to the Authority its Local School Bonds in the form specified in the standard bond documents. Any changes made by the Local Issuer or its bond counsel to the form of the standard bond documents and/or the Local School Bonds must be approved, prior to its adoption, by the Authority.
  3. For so long as the Authority is the registered owner of a Local Issuer's Local School Bonds:
    1. the paying agent and registrar shall be a qualified bank or trust company; and
    2. all payments of principal and interest shall be made in immediately available funds to the Authority on or before 11:00 A.M. on the applicable debt service payment date or redemption date; or, if the scheduled date is not a business day for banks in Virginia or for the Commonwealth, then on or before 11:00 A.M. on the succeeding business day. Overdue payments shall bear interest at the Local School Bond rates.
  4. Each Local Issuer participating in the Authority's financings will covenant not to sell, without the Authority's consent, any general obligation bonds that are part of the same common plan of financing as its Local School Bonds, during a 15-day period before and after the sale of the Authority's bonds.
  5. The Local School Bonds will bear interest from their closing date and will mature annually in amounts specified by the Authority. Local School Bonds purchased under the 1997 Resolution will mature on July 15. The Local School Bonds will bear interest payable semiannually, at rates not to exceed 10 basis points (0.10%) above the actual rates on the Authority's bonds with corresponding maturities.
  6. Local School Bonds purchased under the Authority's 1997 Resolution shall not be subject to redemption prior to their maturity without the prior written consent of the Authority or other registered owner of the Bonds.
  7. The Authority will review the forms of the legal opinions from the local bond counsel representing Local Issuers participating in the Pooled Bond sale to determine that they are satisfactory to the Authority as to:
    1. the validity of, and exclusion from gross income for federal and Virginia income tax purposes of the interest on, the Local School Bonds, if applicable;
    2. the conformity of the terms and provisions of the Local School Bonds to the requirements of the Bond Sale Agreement; and,
    3. the due authorization, execution and delivery of the Bond Sale Agreement, Continuing Disclosure Agreement and the Proceeds Agreement.
  8. Each Local Issuer will be required by the terms of its Bond Sale Agreement to authorize, execute and deliver to the Authority a Continuing Disclosure Agreement in the form appended to the Bond Sale Agreement. By the terms of its Continuing Disclosure Agreement, any Local Issuer that becomes and remains a material obligated person ("MOP") will be required to make certain filings prescribed by the Securities and Exchange Commission Rule 15c2-12. (See Continuing Disclosure section below)
  9. In evaluating any refunding of Pooled Bonds, the Authority will consider the amount of savings to be distributed to Local Issuers or the Literary Fund as well as the resulting cash flows to the Authority.

Fees and Penalties

  1. The Authority will assess a charge not to exceed 10 basis point (0.10%) charge to each coupon in structuring the debt service schedule of participating Local Issuers to cover the Authority's administrative costs over the life of the issue and cost of issuance expenses including bond counsel fees, financial advisor fees, underwriting costs, printing costs, rating agency fees and other costs directly related to bringing the Authority's bonds to market.
  2. While the Authority reserves the right to increase or decrease the amount charged in future Pooled Bond sales, any change will not affect existing Local School Bonds held by the Authority.
  3. Should a Local Issuer decide to reduce its borrowing amount or to drop out of the Pooled Bond sale after the due date of the Bond Sale Agreement, it may be charged for all additional costs incurred by the Authority as a result of the actions taken by the Local Issuer.
  4. A Local Issuer failing to close on its bonds after acceptance of its application by the Authority and execution of a Bond Sale Agreement must pay all allocable costs incurred by the Authority and other professionals including those identified above.

Limitations

  1. The principal amount of Local School Bonds and the description of the project(s) in the resolutions adopted by the Local Issuer's governing body and school board shall be consistent.
  2. If a Local Issuer has had substantially the same project(s) considered at a referendum, the Authority will take into account the referendum results but is not bound by the results and may approve or reject the application for the project(s). Any project(s) that is the subject of a failed referendum which has not been reversed by a subsequent successful referendum, may be eligible for consideration only if both the Local Issuer's governing body and school board have approved resolutions stating that the project(s) is essential, and that one of the following has occurred:
    1. the resolutions have been unanimously approved by both the Local Issuer's governing body and school board, or
    2. at least two years have passed since the referendum, or
    3. the Virginia Department of Education has determined that an emergency exists for the project(s).
  3. The Authority may approve or reject applications for Pooled Bond issues, taking into consideration the merits of the Local Issuers' project(s) and the recommendations of the Virginia Department of Education.

Exceptions

The Authority may, in its sole discretion, exempt from the procedures in this Policy, any specific local bond issue requests, or portions thereof, that it deems to be in the best interests of the Commonwealth and the Authority.

Continuing Disclosure

The Authority is required to establish objective criteria for determining whether Local Issuers are deemed to be "material obligated persons" ("MOP's") within the meaning of SEC Rule 15c2-12 regarding the Local Issuer's Local School Bonds held by the Authority under a particular Pooled Bond resolution. If a Local Issuer is deemed to be a MOP, the Local Issuer will be required to file certain financial and operating information with information repositories. For Local School Bonds held under the 1997 Resolution, a Local Issuer will be deemed a MOP, at the time of determination, if it has Local School Bonds held in the 1997 Purchase Fund outstanding in an aggregate principal amount that exceeds 10% of the principal amount of Authority bonds outstanding under the 1997 Resolution. See item 15, Procedures for Authority Pooled Issues).

Amendments to Policy

The Authority may from time to time issue amendments to this Policy.

Effective Date

The requirements and procedures established by this Policy are effective immediately upon adoption by the Authority.

Adopted March 26, 2009