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Bulletin 4 for the Revised Municipal Finance Act
Authority of Public School Academies To Grant Mortgages As To Their Property
Section 303(2) of Public Act 34 of 2001, the Revised Municipal Finance Act, requires each municipality to file an annual qualifying statement with the Department of Treasury within six months of the end of its fiscal year, or as otherwise provided by law. The Department is required to determine, within 30 business days of receiving a qualifying statement, whether the municipality should be granted or denied qualifying status. If the Department grants qualified status, or fails to notify the municipality of its determination within 30 business days, the municipality then is authorized to issue municipal securities under the Act without further approval from the Department until 30 business days after the next qualifying statement is due, or until a new determination is made by the Department, whichever occurs first.
The term "security", as defined by Section 102(n) of the Revised Municipal Finance Act, means "an evidence of debt" such as "a bond, note, contract, obligation, refunding obligation, certificate of indebtedness, or other similar instrument issued by a municipality which pledges payment of the debt by the municipality from an identified source of revenue".
The term "municipality", as defined by Section 102(j) of the Revised Municipal Finance Act, encompasses a public school academy.
For a public school academy to receive qualified status to issue a municipal security without further review by the Department, the public school academy must meet all the requirements contained in Section 303(3) of the Revised Municipal Finance Act, including subdivision (g) which provides that "[t]he municipality has no outstanding securities that were not authorized by statute".
The authority of a public school academy to borrow pursuant to the Revised School Code is subject to the Revised Municipal Finance Act except to the extent excluded by Section 105 of the Revised Municipal Finance Act.
The Department informally has expressed the view that Sections 503(9), 504a, and 523(6) of the Revised School Code authorized a public school academy to acquire property subject to a mortgage, but did not authorize a public school academy to grant a mortgage as to its property.
Upon further consideration of the foregoing statutory provisions, and in light of enactment by the Legislature of Public Act 179 of 2003, which added Section 503(b) to the Revised School Code, it shall be the position of the Department that a public school academy is authorized to grant mortgages and other security on its property.
This bulletin is issued pursuant to Section 201(b) of the Revised Municipal Finance Act which authorizes the Department to issue bulletins or adopt rules to carry out the purposes of the Act.