Questions and Answers
Regarding the Bonding Option in the Non-Plaintiff Offer of Settlement Amounts
in the Durant Resolution Package*

March 20, 1998 Addendum

Q: What is the next deadline with which I should be concerned?

A: June 30, 1998. Districts wishing to participate in the Durant Resolution Package bonding program must notify the Department of Treasury by submitting the attached resolution indicating their intent to participate by June 30, 1998. A copy of this resolution has also been provided to local bond counsel in Michigan. If you have already selected your bond counsel, you may want to contact this firm regarding submission of the resolution. It is important that the language of the resolution not be modified in any way.

This resolution should be sent to:
U.S. MAIL
State Treasurer
c/o Michigan Municipal Bond Authority
P.O. Box 10033
Lansing MI 48901-0033
ATTN: Durant Resolution Package Program
OVERNIGHT DELIVERY
State Treasurer
c/o Michigan Municipal Bond Authority
430 W. Allegan
Treasury Building - 3rd floor
Lansing MI 48922
ATTN: Durant Resolution Package Program

The resolution must be postmarked by June 30, 1998. Facsimiles will not be accepted. Districts are also required to hold a public hearing before June 30, 1998, to discuss the use of the settlement offer funds.

Q: May bond proceeds be used to refinance installment debt?

A: Only if the installment debt is bonded indebtedness and if the net present value of principal and interest on the refunding bonds will be less than on the refinanced debt. No other refinancing of installment debt from bond proceeds is permitted.

Alternatively, bond proceeds might be used to purchase property under an installment purchase agreement by paying the purchase price balance. Districts should consult their bond counsel in regard to their particular situations.

Q: Can a district invest the proceeds of its Durant Resolution Package bonds?

A: Each district will receive the full amount of its Durant Resolution Package bond proceeds on or about November 15, 1998. Each district will be presponsible for the investment of its own bond proceeds, and will receive any investment earnings, all subject to the usual state law and federal tax law provisions such as spending, arbitrage and rebate requirements. Each district must check with its own bond counsel to determine how these provisions affect its transaction.

Q: May a district, prior to the availability of bond proceeds, spend other funds for permitted purposes and then reimburse itself for those expenditures from bond proceeds, when available?

A: Yes, but only to the extent allowed by the federal tax law governing tax-exempt bonds. This generally requires adoption of a specific resolution by the districts board prior to making such expenditures. Districts which wish to use bond proceeds for such reimbursement should promptly consult their local bond counsel regarding their ability (if any) to do so and in order to adopt a proper resolution for this purpose in a timely manner.

(State law reimbursement requirements applicable to qualified school loan fund bonds are not relevant to this question because the districts bond to be sold to the Michigan Municipal Bond Authority need not and will not be a qualified school loan fund bond.)

Q: Will my school district need to provide full financial information to the Michigan Municipal Bond Authority (MMBA) for inclusion in the MMBAs Official Statement for the bond issue?

A: The MMBA does not currently expect to include detailed information regarding each school districts finances in its official statement. However each district will be required to agree to provide all information necessary for the MMBA to comply with any applicable present or future federal securities laws or regulations.

Q. Will there be any state oversight of how school districts use the proceeds of the bonds which they issue?

A: Bonds issued by a school district may be used only for purposes specified in Section 1351a of the Revised School Code. The Revised School Code requires that a school district have an independent audit, using generally accepted accounting principles, after completion of the projects financed with proceeds of the bonds. As specified in Section 1351a of the Revised School Code, for this bond issue only, the audit may be conducted and submitted with the annual report or audit which school districts are required to file with the Department of Treasury and the Department of Education. If the State Treasurer determines from the audit report that bond proceeds have been used for purposes other than those authorized, the school district will be required to repay the misused funds from other funds of the school district.

If you have questions regarding the auditing requirements for use of bond proceeds, contact:

Michigan Department of Treasury
Local Audit and Finance Division
4th Floor, Treasury Building
Lansing, Michigan 48922
(517) 373-0660

Q: Whom should I call if I have additional questions?

A: The Departments of Treasury, Education, and Management and Budget are working together to develop the process to implement the provisions of the Durant Resolution Package. On December 8, 1997, the Department of Education released The Durant Solution and Changes in State School Aid for 1997-98 and 1998-99, a document summarizing the three bills in the package. A copy of this document was sent to all intermediate school district superintendents and is available on the Department of Education's web site.

Also in December 1997 the Department of Treasury released a "Questions & Answers" document (to which this document is an addendum) which provides initial information regarding the bonding option for non-plaintiff districts with offers of settlement amounts. This December Questions & Answers document is also available on the Department of Educations web site.

If you have general questions regarding the provisions of the Durant Resolution Package, including questions about the ten annual payments provision, contact:

Elaine Madigan Mills
Department of Education
(517) 335-0521; e-mail: MadiganMillsE@michigan.gov

If you have questions regarding the November 1998 bonding program, contact:

Janet Hunter-Moore
Michigan Municipal Bond Authority
Department of Treasury
(517) 373-1728

If you have questions regarding the use of bond proceeds, contact your local legal counsel.

* This "Questions and Answers" document is only intended as a guide and does not take place of the law.

Michigan Department of Treasury
March 20, 1998



Last Updated: 05/18/1999 at 3:00 pm

Copyright 1998 by State of Michigan