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Texas Education Code - Section 43.011. Authorized Refunding Of Defaulted School Bonds

Legal Research Home > Texas Lawyer > Education Code > Texas Education Code - Section 43.011. Authorized Refunding Of Defaulted School Bonds

§ 43.011. AUTHORIZED REFUNDING OF DEFAULTED SCHOOL 
BONDS.  (a) In compliance with this section, the State Board of 
Education may revise, readjust, modify, refinance, or refund 
defaulted bonds issued by any school district in this state and 
owned by either the permanent school fund or the available school 
fund.
	(b)  Application must be made to the State Board of Education 
by the district that issued the bonds and must show that:
		(1)  delinquent interest totals at least 50 percent of 
the principal amount of the bonds;  and
		(2)  taxable valuation has decreased to such an extent 
that a full application of the proceeds of the voted authorized tax 
authorized to be levied on the $100 taxable property valuation will 
not meet interest and principal annually maturing on the bonds.
	(c)  The State Board of Education may effect a refunding of 
the debt due and to become due only if the board finds that:
		(1)  the district is unable to pay the sums already 
matured and the sums contracted to be paid as they mature by paying 
annually to the State Board of Education the full proceeds of a 
50-cent tax levy on the $100 of all taxable valuation of property in 
the district;
		(2)  the taxable valuation of property in the district 
has decreased at least 75 percent since the bonds were issued and 
that the decrease was not caused by the district or any of its 
officials;
		(3)  the district for a period of at least five years 
before applying to the State Board of Education for refunding has 
levied a tax of 50 cents on the $100 of taxable valuation of 
property in the district, and that despite such levies, the 
aggregate amount due the State Board of Education exceeds the 
aggregate amount due at the beginning of the period;
		(4)  the district has not authorized and sold 
additional bonds during the five-year period immediately preceding 
the application;  and
		(5)  the district has in good faith endeavored to pay 
its debt in accordance with the contract evidenced by the bonds held 
for the account of the permanent school fund or the available school 
fund.
	(d)  If the conditions specified by Subsection (c) are found 
to exist, the district is, for purposes of this section, insolvent, 
and the State Board of Education may exchange the bonds, interest 
coupons, and other evidences of indebtedness for new refunding 
bonds of the district issued in compliance with the following:
		(1)  the principal amount of the refunding bonds may 
not be less than the total amount of the bonds, matured interest 
coupons, accrued interest, and interest on delinquent interest then 
actually due to the permanent school fund or the available school 
fund;  and
		(2)  the rate of interest to be borne by the refunding 
bonds may be lower than that borne by the bonds to be refunded if in 
consideration of the interest reduction the district agrees to levy 
a tax each year for a period of 40 years at a rate sufficient to 
produce annually a sum equal to 90 percent of the amount that can be 
calculated by the levy of a tax at the rate of 50 cents on the $100 
of taxable valuation of property as determined by the latest 
approved tax roll of the district, and in determining the rate of 
interest to be borne by the refunding bonds, the State Board of 
Education shall be governed by the following:
			(A)  the State Board of Education may require the 
rate to be a percent per annum as in its judgment will represent the 
maximum rate that can be paid by the district and still permit an 
orderly and certain retirement of the refunding bonds within 40 
years from their date;
			(B)  the interest rate of refunding bonds to be 
received in exchange for bonds owned by the permanent school fund 
may not be less than the minimum rate at which bonds may then be 
purchased as investments for the permanent school fund;  and
			(C)  the rate of interest of refunding bonds to be 
received in exchange for bonds owned by the available school fund 
may be set by the State Board of Education at any rate the board 
considers feasible, and the refunding bonds may, at the discretion 
of the State Board of Education, be made non-interest bearing to a 
date fixed by the board.
	(e)  The State Board of Education may not make a revision, 
readjustment, modification, refinancing, or refunding that will 
release or extinguish any debt or obligation then due and payable to 
the permanent school fund or to the available school fund.
	(f)  Except as otherwise provided or permitted by this 
section, the refunding of the bonds of school districts authorized 
by this section must be in compliance with the general provisions 
with regard to the refunding of school district bonds.

Added by Acts 1995, 74th Leg., ch. 260, § 1, eff. May 30, 1995.            

Last modified: August 10, 2007