The last amendments to this chapter occurred in 1996. During the rule review process, we determined the rules in Chapter 19-5, F.A.C. needed to be consolidated and updated. The six separate rules currently set forth in Chapter 19-5 can be ...

 

STATE BOARD OF ADMINISTRATION

RULE NO.:RULE TITLE:

19-5.001Interest Rate Limitation on Sale of Bonds of Governmental Units

PURPOSE AND EFFECT: The last amendments to this chapter occurred in 1996. During the rule review process, we determined the rules in Chapter 19-5, F.A.C. needed to be consolidated and updated. The six separate rules currently set forth in Chapter 19-5 can be consolidated and incorporated into a single Rule 19-5.001. Consolidating the rules in Chapter 19-5 will eliminate extraneous provisions and should facilitate readability by listing all process steps and documents required to comply with the rule in one place rather than in six separate rules that cross reference each other. As such, the amendments are being proposed to consolidate, through amendment and repeal, all of the relevant provisions in Rule Chapter 19-5 into Rule 19-5.001.

Rule 19-5.001 is also being amended to describe the informal review process conducted by the SBA’s Executive Director after receipt of an application from a governmental unit requesting authority to sell bonds at an interest rate in excess of an otherwise statutory maximum interest rate. Rule 19-5.003 presently describes a slightly different review process for applications to sell bonds in excess of 50 basis points above the otherwise statutory maximum interest rate. That portion of Chapter 19-5 is being deleted. The same process will apply to all applications under this rule. Provisions also are being updated to clarify the types of information that the Executive Director & CIO may consider in conducting the informal review. The rule further clarifies that the authorization to issue bonds at an interest rate in excess of the legal limitation expires 180 days after the authorization has been given.

SUMMARY: To update, consolidate and clarify provisions concerning the procedures to be followed by a governmental unit to apply for authority to issue bonds at an interest rate in excess of the maximum set by law. There are no other rules incorporating this rule.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION:

The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: Upon review of the proposed changes to the rules, the State Board of Administration has determined that the rules do not meet the statutory threshold for ratification by the legislature. There will be no impact on economic growth, job creation or employment, private-sector investment, or business competitiveness, and no increase in regulatory costs.

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.

RULEMAKING AUTHORITY: 159.825(3), 215.52, 215.84(5) FS.

LAW IMPLEMENTED: 159.825, 215.84 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: Wednesday, September 11, 9:00 a.m. – 11:00 a.m.

PLACE: Hermitage Room, the Hermitage Centre, 1801 Hermitage Blvd., Tallahassee, Florida 32308

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: Tina Joanos, Agency Clerk, Office of the General Counsel, State Board of Administration, 1801 Hermitage Blvd., Tallahassee, Florida 32308, [phone], [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: Ruth A. Smith, Assistant General Counsel, State Board of Administration, 1801 Hermitage Blvd., Tallahassee, Florida 32308, [phone] [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

19-5.001 Interest Rate Limitation on Sale of Bonds of Governmental Units.

(1) Bonds of any governmental unit may be sold at an interest rate in excess of the maximum set by law, only if application has been made to the State Board of Administration and authority is granted to the governmental unit by the Board pursuant to Section 215.84, Florida Statutes, in the case of tax exempt bonds, or Section 159.825, Florida Statutes, in the case of taxable bonds. Provided, however, in determining whether or not the governmental unit has complied with the interest rate limitation set forth in Section 215.84(3), Florida Statutes, in the issuance of their bonds, where the purchaser of any such bonds is the U.S. Department of Agriculture, Farmers Home Administration, such obligations shall be deemed sold when Farmers Home Administration gives a binding commitment to purchase the bonds even though such commitment is subject to conditions subsequent such as completion of the project being financed with bond proceeds and the computation of adding 300 basis points to The Bond Buyer “20 Bond Index” published immediately preceding the first day of the calendar month in which the bonds are sold shall be computed on the date of such commitment.

(2) The maximum interest rate limitation specified in Section 215.84, Florida Statutes, in the case of tax exempt bonds, or Section 159.825, Florida Statutes, in the case of taxable bonds, does not apply to bonds within the rating categories of A or better by Moody’s Investors Services, Inc., Standard & Poor’s Corporation, or Fitch Investors Service, Inc., or, in the case of short-term obligations or notes, within the rating categories of MIG2 or VMIG2 or better by Moody’s Investors Services, Inc., SP-2 or better by Standard and Poor’s Corporation, or F-2 or better by Fitch Investors Service, Inc.

(3) Any governmental unit requesting authority to sell its obligations at an interest rate in excess of the maximum set by law shall make application to the State Board of Administration requesting such authority. The application shall be in writing and signed by a responsible official of the governmental unit issuing the bonds or notes. The application shall specify the maximum average net interest cost rate at which the governmental unit is requesting authority to sell its obligations, and shall state the reasons requiring the sale of the bonds at an average net interest rate in excess of the maximum set by law. The following documents or information must be included with the application:

(a) The official statement or prospectus, if available, or similar information relating to the sale of the bonds;

(b) The resolution or ordinance authorizing the issuance of the bonds;

(c) Financial data relating to the anticipated revenue, debt service and coverage;

(d) The most recent financial statement of the governmental unit;

(e) A certified copy of Judgment of Validation if the bonds have been validated;

(f) Information relating to sale of the bonds, including whether they will be sold at public or private sale and the amount of the discount, if any; and

(g) Any other pertinent document or information specifically requested.

(4) After receipt by the Board of the governmental unit’s application and materials referenced in (3), above, the Board may authorize the sale of bonds at an average net interest cost rate in excess of the statutory interest limitation after an informal review by the Executive Director.

(a) The Board in making its determination shall consider, but not be limited to considering,

1. comparable sales of bonds or other debt of governmental units, and

2. documented evidence that the objectives and the intent of issuing the bonds will be realized,

(b) The Executive Director in conducting the informal review shall consider the items in a., and may consider other aspects of the bonds, including without limitation,

1. whether the bonds will be privately-placed to accredited investors or publicly-offered, directly or indirectly, such as part of a mutual fund, to individuals,

2. the minimum denomination of the bonds,

3. if the bonds are to finance a project, the principal amount of the bonds relative to other sources of financing of the project,

4. the amortization schedule of the bonds, and

5. the frequency with which the issuer issues bonds.

(c) Information regarding comparable sales of bonds or other debt of governmental units may be provided by a report of staff of the Board or the Division of Bond Finance or by a report of a financial advisor to the Board or the Division of Bond Finance. Documented evidence that the objectives and intent of issuing the bonds will be realized may include, without limitation, statements in the official statement, prospectus or credit underwriting report for the bonds (if applicable) or other evidence, such as construction performance bonds or similar insurance or guarantees, indicating that the project or facility financed by such bonds or debt is reasonably expected to be completed. The Executive Director shall complete the informal review within a reasonable time after receipt of all information required or requested pursuant to these rules but in no event shall the Executive Director be required to complete the informal review sooner than thirty (30) days after receipt of the governmental unit’s completed application.

(d) Upon completion of the informal review, the Executive Director shall provide a report to the Board including the Executive Director’s recommendation with respect to the governmental unit’s request for the sale of bonds at an average net interest rate in excess of the maximum set by law, or shall communicate to the governmental unit that no recommendation can be made and shall provide to the governmental unit a short statement for the reasons therefor. The Board, at a meeting subsequent to the prepraration of the report of the Executive Director, may consider this recommendation in determining whether to authorize the issuance of such bonds at an average net interest rate in excess of the maximum set by law.

(e) The Executive Director may utilize the services and staff of the Board, any other state governmental entity, including without limitation, the Division of Bond Finance, or a financial advisor to the Board or the Division of Bond Finance in conducting the informal review.

(f) The informal review provided for herein is an agency investigation preliminary to agency action within the meaning of Section 120.57(5), F.S.

(5) The Board’s authorization, with respect to a specific issue or reissue of bonds, of a specified maximum average net interest cost rate in excess of the maximum set by law shall expire one hundred eighty (180) days after the date of the Board’s authorization with respect to such issue or reissue of bonds.

(6) The official statement or prospectus shall contain a statement that the authorization of the State Board of Administration for the issuing agency to sell its obligations at an interest rate in excess of the maximum permitted by law is made pursuant to Section 215.84, Florida Statutes, in the case of tax exempt bonds or Section 159.825, Florida Statutes, in the case of taxable bonds, and is not to be construed as an approval or recommendation of the issue by the State Board of Administration.

Rulemaking Specific Authority 159.825(3), 215.52, 215.84(5) FS. Law Implemented 159.825, 215.84 FS. History–New 10-23-75, Repealed and Readopted 10-14-80, Amended 2-1-83, 12-25-85, Formerly 19-5.01, Amended 12-10-87, 10-6-96,__________.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Lamar Taylor, Deputy Executive Director

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Trustees of the State Board of Administration

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: August 6, 2013

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: March 12, 2013