o implement Department responsibilities under Section 287.063 and 287.064, F.S. To amend Rule 69I-3.001, F.A.C., to implement Department responsibilities under Section 287.064, F.S. In 2008, Section 25, Chapter 2008-227, Laws of Florida, amending ...

DEPARTMENT OF FINANCIAL SERVICES
Division of Accounting and Auditing

RULE NO: RULE TITLE
69I-3.001: Consolidated Equipment Financing Program
69I-3.003: Procedure for Negotiation and Execution of Master Equipment Financing Agreements
69I-3.004: Deferred Payment Commodity Contracting
PURPOSE AND EFFECT: o implement Department responsibilities under Section 287.063 and 287.064, F.S. To amend Rule 69I-3.001, F.A.C., to implement Department responsibilities under Section 287.064, F.S. In 2008, Section 25, Chapter 2008-227, Laws of Florida, amending Section 287.064, F.S., modified approval criteria and allowed a master financing program for contracts approved by the Department under Section 489.145, F.S., for guaranteed energy, water, and wastewater performance savings contracting. Chapter 2008-227, Laws of Florida, also amended Section 287.063, F.S., adding requirements to the criteria stated in Section 287.063, F.S., for allowing an agency to seek financing without using the Consolidated Equipment Finance Program (CEFP). A new rule is being promulgated to reflect these statutory changes, and to separate the rules related to Section 287.063, F.S., exceptions to the CEFP from Rule 69I-3.001, F.A.C., which addresses rules for the CEFP. Finally, Rule 69I-3.003, F.A.C., is being repealed. Since Rule 69I-3.001, F.A.C., is being modified to address the CEFP, and update the definitions and procurement process associated with that program, there is no longer a need for this rule. Rule 19A-5.0035, F.A.C., which establishes the procedure for negotiation and award of the Master Equipment Financing Agreement for this program and Rule 69I-3.001, F.A.C., establishes how it is administered by the Department, will replace this rule.
SUMMARY: Establish criteria for approving purchases made under deferred payment contracts which require the payment of interest, related to requesting equipment leases, under Sections 287.063 and 287.064, F.S.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 17.29, 287.063(2)(b), 287.064(8) FS.
LAW IMPLEMENTED: 287.063, 287.064 FS.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE,TIME AND PLACE SHOWN BELOW(IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):
DATE AND TIME: January 20, 2010, 2:00 p.m. ET
PLACE: Room 430, Fletcher Building, 101 E. Gaines St., Tallahassee, FL
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Mike Rutherford [phone] or [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Mike Rutherford [phone] or [e-mail]

THE FULL TEXT OF THE PROPOSED RULE IS:

69I-3.001 Consolidated Equipment Financing Program.

(1) For the purposes of this rule chapter, the following definitions shall be used:

(a) “Additional Services” means administrative and any other services associated with managing the Consolidated Equipment Financing Program.

(b) “Agency” means any agency as defined by Section 287.012, F.S., any department created by Chapter 20, F.S., the Executive Office of the Governor, the Florida Fish and Wildlife Conservation Commission, the Parole and Probation Commission, the State Board of Administration, the Agency for Health Care Administration, the Department of Military Affairs, the Legislative Branch or the Judicial Branch of State Government.

(c) “Chief Financial Officer” means the head of the Department of Financial Services, whose deferred payment commodity contracting duties are carried out by and through its Division of Accounting and Auditing of the Department of Financial Services. However, the Chief Financial Officer’s duty to execute the master equipment financing agreements is not delegated to the division.

(d) “Educational Institution” means state universities and state community colleges who also participate in the Consolidated Equipment Financing Program as authorized by Section 287.064 (1), F.S.

(e)(d) “Interagency Agreement” means an equipment financing agreement between a financial institution the Chief Financial Officer, and the Agency or Educational Institution, based on the executed Master Equipment Financing Agreement an agency. The respective Agency or Educational Institution is responsible for all payments under its completed and approved Interagency Agreement. Equipment purchased by the Interagency Agreement shall be directly billed by the financial institution, to the respective Agency or Educational Institution.

(f)(e) “Master Equipment Financing Agreement” means a master equipment financing agreement to be executed pursuant to Section 287.064, F.S., for the purpose of implementing a consolidated financing program for the acquisition of equipment by deferred payment deferred-payment purchases, as defined by Section 287.064(1), F.S., made by or on behalf of the State of Florida or its agencies or by or on behalf of Educational Institutions state community colleges. The term “Master Equipment Financing Agreement” includes all agreements and contracts necessary or convenient for the establishment of a Master Equipment Financing Agreement. “Rent” means the period payment amount total due on an Interagency Agreement within a Master Equipment Financing Agreement.

(g) “Master Equipment Financing Agreement for Conservation Measures” means a master equipment financing agreement to be executed pursuant to Section 287.064 (10), F.S., for the purpose of implementing a consolidated financing program for the financing of the cost of energy, water, or wastewater efficiency and conservation measures (“Conservation Measures”) as defined in Section 489.145, F.S. “Program” means the Consolidated Equipment Financing Program, which shall consist of the program of financing the deferred payment purchases of equipment on behalf of the State or the state agencies pursuant to 287.064, F.S.

(h) “Program” means the Consolidated Equipment Financing Program, which shall consist of the program of financing the deferred payment purchases of equipment on behalf of the State, Educational Institutions or the state agencies pursuant to Section 287.064, F.S.

(i) “Rent” means the amount of payment for a period as defined in an Interagency Agreement within a Master Equipment Financing Agreement.

(2)(a) An Agency or Educational Institution that agency which desires to make deferred payment purchases shall make a written request to participate in the Program. An Agency shall make or a written request for exemption from the Program.

(a) An Agency or Educational Institution that agency which desires to finance or refinance existing deferred payment purchases through the Program shall may make a written request to participate in the Program. An Agency or Educational Institution agency requesting permission to participate in the Program must submit to the Chief Financial Officer for preaudit review and approval the following:

1. A completed and executed Form DFS-A1-410 (for purchases under the Consolidated Equipment Financing Program) Application to Finance Equipment per Section 287.064, F.S., revised effective (______) Checklist for Requesting Department of Financial Services Chief Financial Officer’s Approval to Installment Purchase Equipment through the Consolidated Equipment Financing Program, revised 05/99. The Form form is hereby incorporated by reference, can be viewed at http://www.myfloridacfo.com/aadir/, and is available from the Division of Accounting and Auditing, Bureau of Accounting, 200 East Gaines Street, Tallahassee, Florida 32399-0354.

2. A statement documenting indicating whether the equipment is new or used and, if the equipment is used, whether the equipment is currently financed under an installment purchase contract approved by the Chief Financial Officer and, if so, state the date of approval by the Chief Financial Officer and the Chief Financial Officer approval number assigned.

3. A statement documenting indicating the proposed original term and renewal terms under the Interagency Agreement and the anticipated remaining useful economic life of the equipment.

4. A statement certifying that the deferred payment commodity contract does not exceed the useful life of the equipment unless the contract provides for the replacement or the extension of the useful life of the equipment during the term of the loan.

5. If the equipment purchase financing term is beyond 5 years, the Agency must seek an exemption from the Program pursuant to Section 287.064(2), F.S. and seek an exemption according to Rule 69I-3.004, F.A.C.

6. Documentation to substantiate that the annualized amounts of any deferred payment commodity contract are supported from available recurring agency has reasonably determined that it will have sufficient funds available to make the payments under the Interagency Agreement as they become due. Available recurring funds must be appropriated to the Agency in an appropriation category as defined in Section 287.064(11) F.S., determined by the Chief Financial Officer as appropriate, or designated by the Legislature for payment of the obligation incurred under Section 287.064 or 489.145, F.S. as applicable. In accordance with Section 216.023(4)(a)9., F.S., supporting information for any proposed consolidated financing of deferred payment commodity contracts must also include a narrative describing and justifying the need, baseline for current costs, estimated cost savings, projected equipment purchases, estimated contract costs, and return on investment calculation.

7.5. Documentation to substantiate that the Agency or Educational Institution agency has complied with all applicable requirements to lawfully procure the equipment.

8.6. Documentation If the equipment purchase price is less than $30,000, documentation to substantiate that the purchase by deferred payment is economically beneficial to the State or that failure to make the purchase will adversely affect the Agency’s or Educational Institution’s agency’s performance of its duties.

(b) An Agency or Educational Institution agency financing the acquisition of equipment shall provide the information required in paragraph (a) at least twenty-one days prior to the anticipated date of awarding the contract for such equipment.

(c) Any contract for equipment, the payment of which is anticipated to be made by deferred payment and the payment of interest, shall specify that the award of such contract is contingent upon approval pursuant to Section 287.063, F.S., unless specifically exempted pursuant to Rule 69I-3.004, F.A.C., and Section 287.064, F.S.

(3) The Chief Financial Officer may exempt any equipment from financing under the Program when alternative financing would be cost effective or otherwise beneficial to the State. The factors to be examined by the Chief Financial Officer to determine whether the equipment may be deemed exempt from the Program, are stated in Rule 69I-3.004, F.A.C. shall include the following:

(a) The nature of the equipment;

(b) The useful life of the equipment;

(c) The length of the proposed original term and renewal terms of the Interagency Agreement;

(d) Availability of funds under the Program;

(e) Impact on the federal tax exemption of the interest portion of the consolidated rent payments under the Program; and

(f) The alternative financing costs.

(4) Agencies or Educational Institutions may use a Master Equipment Financing Agreement for Conservation Measures, pursuant to Section 287.064(10)(a), F.S., to finance the cost of energy, water, or wastewater efficiency and conservation measures in accordance with Section 489.145, F.S., excluding the costs of training, operation, and maintenance, for a term of repayment that may exceed 5 years but may not exceed 20 years. The term for repayment may not extend beyond the weighted average useful life of the Conservation Measures financed. The contract shall provide for the replacement or the extension of the useful life of the equipment during the term of repayment. An Agency or Educational Institution that desires to make deferred payment purchases of Conservation Measures shall make a written request to use a Master Equipment Financing Agreement for Conservation Measures. An Agency or Educational Institution requesting permission to use a Master Equipment Financing Agreement for Conservation Measures must submit to the Chief Financial Officer for preaudit review and approval based on the following:

(a) A completed Form DFS-A1-413 (for purchases under the Consolidated Equipment Financing Program for Conservation Measures) Application to Finance Conservation Measures, effective (_____). Form DFS-A1-413 is hereby incorporated by reference and is available from the Division of Accounting and Auditing, Bureau of Accounting, 200 East Gaines Street, Tallahassee, Florida 32399-0354.

(b) Items 2-4 and 6-8 in paragraph (2)(a) above.

(5)(4) If equipment is eligible for financing under more than one master equipment financing agreement, the Chief Financial Officer shall determine which Master Equipment Financing Agreement shall be utilized. The factors to be examined to determine whether the equipment is eligible for financing under more than one master equipment financing agreement shall include the following:

(a) The type or category of the equipment;

(b) The useful life of the equipment;

(c) The length of the proposed original term and renewal terms of the Interagency Agreement; and

(d) Availability of funds under the Master Equipment Financing Agreement.

(6)(5) The Chief Financial Officer may, when stipulated in the Master Equipment Financing Agreement, automatically debit or otherwise collect from each Agency agency the rent payments on Interagency Agreements. The payments or any fractional part thereof under an Interagency Agreement may be prorated by the Chief Financial Officer and, whether or not prorated, shall be payable on the commencement date of the Interagency Agreement and thereafter the rent payment may, when stipulated in the Master Equipment Financing Agreement, be automatically debited or otherwise collected pursuant to the Interagency Agreement.

(6)(a) All funds debited or otherwise collected from each agency may be deposited in the Consolidated Payment Trust Fund pursuant to Section 287.064(6), F.S.

(b) The trust fund shall consist of separate accounts for each master equipment financing agreement and, so long as any financial obligations exist with respect to a master equipment financing agreement, shall be used solely to meet such financial obligations and the cost of related additional services.

(c) Any income from the investment of funds may be used to fund administrative costs associated with the Program.

(7) The Chief Financial Officer shall calculate and determine compliance with any interest rate limitations applicable to the Interagency Agreement or any Master Equipment Financing Agreement. For the purpose of determining compliance with interest rate limitations on any Interagency Agreement, interest rates shall not include administrative costs, surcharges and insurance expense related to the Program.

(8) For the purpose of determining the useful life of equipment, the factors to be considered by the Chief Financial Officer shall include the following:

(a) The type or category of equipment;

(b) Whether the equipment is new or used;

(c) The condition of the equipment;

(d) The period of intended use; and

(e) Purpose of the equipment.

(9) The procedure for the negotiation and execution of Master Equipment Financing Agreements is as follows:

(a) Upon the receipt of a written request by the Chief Financial Officer, the Division of Bond Finance of the State Board of Administration shall negotiate Master Equipment Financing Agreements. The procurement and negotiation of Master Equipment Financing Agreements shall be according to Rule 19A-5.0035, F.A.C.

(b) Upon the Chief Financial Officer’s acceptance of the terms and conditions of a Master Equipment Financing Agreement negotiated by the Division of Bond Finance, the Chief Financial Officer shall execute the Master Equipment Financing Agreement.

Rulemaking Specific Authority 17.29, 287.064(8) FS. Law Implemented 287.063, 287.064 FS. History–New 9-10-86, Amended 12-20-94, 5-12-97, 1-27-98, 9-13-99, Formerly 3A-3.001, Amended _______.

 

69I-3.003 Procedure for Negotiation and Execution of Master Equipment Financing Agreements.

Rulemaking Specific Authority 17.29, 287.063(2)(b), 287.064(8) FS. Law Implemented 287.063, 287.064 FS. History–New 3-20-90, Amended 12-20-94, 5-29-95, Formerly 3A-3.003, Repealed_________.

 

69I-3.004 Deferred Payment Commodity Contracting.

(1) For the purposes of this rule, the following definitions shall be used:

(a) “Agency” means any agency as defined by Section 287.012, F.S., any department created by Chapter 20, F.S., the Executive Office of the Governor, the Florida Fish and Wildlife Conservation Commission, the Parole Commission, the State Board of Administration, the Agency for Health Care Administration, the Department of Military Affairs, or the Judicial Branch of State Government.

(b) “Chief Financial Officer” means the head of the Department of Financial Services, whose deferred payment commodity contracting duties are carried out by and through its Division of Accounting and Auditing. However, the Chief Financial Officer’s duty to execute the master equipment financing agreements is not delegated to the Division.

(c) “Financing Agreement” means the proposed financing agreement associated with deferred payment purchases for which exemption from using the Consolidated Equipment Financing Program is sought.

(d) “Program” means the Consolidated Equipment Financing Program, which shall consist of the program of financing the deferred payment purchases of equipment on behalf of the State or the state agencies pursuant to Section 287.064, F.S.

(2) An Agency that desires to make deferred payment purchases not using the Consolidated Equipment Financing Program shall make a written request for exemption from the Program and seek approval to obtain financing pursuant to Section 287.063, F.S.

(a) An Agency requesting exemption from the Program must submit to the Chief Financial Officer for preaudit review and approval the following:

1. A draft of the Financing Agreement for which an exemption from the program is sought.

2. A statement documenting whether the equipment is new or used and, if the equipment is used, whether the equipment is currently financed under an installment purchase contract approved by the Chief Financial Officer, including the date of approval by the Chief Financial Officer and the assigned Chief Financial Officer approval number.

3. A statement documenting the proposed original term and renewal terms under the proposed Financing Agreement and the anticipated remaining useful economic life of the equipment.

4. A statement documenting that the payment term in the proposed Financing Agreement does not exceed the useful life of the equipment or that the contract provides for the replacement or the extension of the useful life of the equipment during the term of the loan.

5. Documentation, including the amortization table for the proposed Financing Agreement, to substantiate that the interest rate of the Financing Agreement is lower than the interest rate offered by the Program and does not exceed the statutory ceiling contained in Section 287.063(1)(b), F.S.

6. If the equipment purchase price is beyond 5 years, documentation as authorized by Section 287.063(2)(b), F.S., to substantiate that the failure to make such deferred payment purchase would adversely affect the Agency in performance of its duties.

7. Documentation to substantiate that the annualized amounts of any Financing Agreement are supported from available recurring funds available to make the payments under the proposed Financing Agreement as they become due, appropriated to the Agency in an appropriation category as defined in Sections 287.063(5) and 287.064(11), F.S., or documentation that the Legislature has designated for payment of the obligation incurred under Section 287.063, F.S.

8. Documentation to substantiate that the Agency has complied with all applicable requirements to lawfully procure the equipment.

9. Unless waived by a formal Comptroller/Chief Financial Officer Memorandum, documentation to substantiate that the purchase by deferred payment is economically beneficial to the State or that failure to make the purchase will adversely affect the Agency’s performance of its duties.

10. Documentation to substantiate type or category of equipment, condition of the equipment, the period of intended use and purpose of the equipment.

(b) An Agency financing the acquisition of equipment shall provide the information required in paragraph (a) at least twenty-one days prior to the anticipated date of awarding the contract for such equipment.

(c) An Agency shall provide documentation to substantiate that the contract for equipment, the payment of which is anticipated to be made by deferred payment and the payment of interest, specifies that the award of such contract is contingent upon approval pursuant to Section 287.063, F.S.

(3) The Chief Financial Officer may exempt any equipment from financing under the Program when alternative financing would be cost effective or otherwise beneficial to the State. The factors to be examined by the Chief Financial Officer to determine whether the equipment may be deemed exempt from the Program shall include the following:

(a) The nature of the equipment in accordance with Section 287.063(1)(a), F.S.;

(b) The useful life of the equipment in accordance with Section 287.063(2)(b), (3), F.S., which shall include a determination of the following:

1. The type or category of equipment;

2. Whether the equipment is new or used;

3. The condition of the equipment;

4. The period of intended use; and

5. Purpose of the equipment;

(c) The length of the proposed original term and renewal terms of the proposed Financing Agreement in accordance with Section 287.063(2)(b), (3), F.S.;

(d) Availability of funds under the Program in accordance with Section 287.063(5), F.S.;

(e) Impact on the federal tax exemption of the interest portion of the consolidated rent payments under the proposed alternative financing in accordance with 26 CFR 1.103-1; and

(f) The alternative financing costs.

(4) The Chief Financial Officer shall calculate and determine compliance with any interest rate limitations applicable to the Financing Agreement that is determined to be exempt from the Program. For the purpose of determining compliance with interest rate limitations on any proposed Financing Agreement, interest rates shall not include administrative costs, surcharges and insurance expense related to the financing, which is determined to be exempt from the Program in accordance with Sections 287.063(1)(a) and 287.063(2)(a), F.S.

Rulemaking Authority 17.29, 287.063(2)(b) FS. Law Implemented 287.063, 287.064 FS. History–New________.

NAME OF PERSON ORIGINATING PROPOSED RULE: Mike Rutherford [phone] or [e-mail]
NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Alex Sink, Chief Financial Officer
DATE PROPOSED RULE APPROVED BY AGENCY HEAD: December 10, 2009
DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAW: October 23, 2009