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DEPARTMENT OF ADMINISTRATIVE SERVICES,
CHIEF FINANCIAL OFFICE

 

DIVISION 70

STATE OF OREGON FINANCING AGREEMENTS

122-070-0100

Authority

Only the Director of the Department of Administrative Services is authorized by ORS 283.085 to 283.092 to enter into Financing Agreements to acquire real property or personal property for State Agencies. ORS 184.340 authorizes the Department of Administrative Services, with the approval of the Governor, to make reasonable rules and regulations that are necessary or proper for the administration of the law that the Department is charged with administering.

Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: BMD 1-2012, f. 1-26-12, cert. ef. 2-1-12

122-070-0110

Definitions

Unless the context indicates otherwise, capitalized terms used in this chapter 122, division 70 of the Oregon Administrative Rules shall have the following meanings:

(1) Benefiting Agency refers to a State Agency or a Division of Department of Administrative Services that has direct control of, or responsibility for, an asset that is paid for through a Financing Agreement.

(2) Capital Lease means a lease that:

(a) Meets the criteria for recording as a capital lease as set forth in generally accepted accounting principles or the State Accounting Manual; or

(b) Is for a real property asset being built on state owned land, unless the Director of the Department of Administrative Services exempts the transaction from such classification.

(3) Department means the Department of Administrative Services, Chief Financial Office.

(4) Director means the Director of the Department of Administrative Services.

(5) Finance Manager means the Capital Finance Manager of the Capital Investment Section of the Department of Administrative Services, Chief Financial Office.

(6) Financing Agreement means an agreement authorized under ORS 283.085 to 283.092 that includes:

(a) Certificates of Participation, (together with the related loan agreement), issued by the State Treasurer in a public or private sale;

(b) Promissory notes or other contract undertakings to pay moneys over time that are privately placed with a single or limited group of lenders; or

(c) Any other agreements for the acquisition of real or personal property through installment payments, including Capital Leases and Software Contracts but excluding Qualifying Service Agreements and Operating Leases.

(7) Operating Lease means a lease that meets the criteria for recording as an operating lease as set forth in generally accepted accounting principles or the State Accounting Manual.

(8) Qualifying Service Agreement means an agreement that in substance facilitates the provision of service by a vendor as its primary objective and may allow for use or licensing of proprietary software or hardware to achieve service objectives without transfer of such software or hardware at the end of the agreement.

(9) Software Contract means a lease of software and training and maintenance contracts related to the operation of computing equipment. A software contract does not include:

(a) A term license for the use of software that is terminable without any penalty or with a penalty amount that is deminimus compared to the value of the software at the time of termination; or

(b) “Software as a service” under a contract for vendor services which are provided through the use of a vendor’s software.

(10) State Agency or Agency has the meaning given in ORS 291.002.

(11) Tax-advantaged refers to a benefit provided by a governmental authority to the issuer or holder of a bond or other evidence of indebtedness in the form of exemption from taxation, a tax-deferral or a tax credit to the holder of the indebtedness, an interest rate subsidy payment to the issuer, or any other type of financial benefit. Qualification for such treatment generally requires ongoing compliance with various laws and regulations by the issuer.

Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: BMD 1-2012, f. 1-26-12, cert. ef. 2-1-12

122-070-0120

Budget Requests for Financing Agreements

(1) Any Benefiting Agency intending to acquire real property or personal property, including software, using a Financing Agreement that exceeds $100,000 and that will create a payment obligation that covers multiple biennia must notify the Finance Manager as a part of the budget preparation process in accordance with the Department’s Budget & Legislative Concepts Instructions.

(2) Benefiting Agencies that have identified the need for Financing Agreements during their budget preparation process may receive priority for the Director’s approval in the event demand exceeds the available biennial authority or limitation for Financing Agreements.

(3) Benefiting Agencies requesting approval for Financing Agreements will make such request in the form prescribed by the Department.

(4) For State Agencies subject to ORS 276.429, when requesting approval of Financing Agreements to acquire office quarters, such Agencies will provide:

(a) Evidence that the action has received approval from the Legislative Assembly; or

(b) Such information as is requested by the Director so that the planned action can be reported to the legislative review agency established in ORS 291.371 prior to the Director’s approval.

(5) For State Agencies not subject to ORS 276.429, requests for approval of Financing Agreements to acquire office quarters shall include evidence that such acquisitions are authorized under the Agency’s governing laws, rules or policies.

Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: BMD 1-2012, f. 1-26-12, cert. ef. 2-1-12

122-070-0130

Approval and Execution of Financing Agreements

(1) The acquisition of any capital asset by a State Agency that is paid through a Financing Agreement must be done in accordance with the procedures established in ORS 283.087 to 283.092 if the principal portion of the agreement exceeds $100,000.

(2) The acquisition of any software or capital asset may not be divided into parts with each part being less than $100,000, to avoid the Financing Agreement approval process. The Department will combine each component of a “single project” to determine if the principal amount of the financing for the project exceeds $100,000. If the principal amount exceeds $100,000 the financing is subject to ORS 283.087 to 283.092.

(3) A "single project" will be determined to exist if:

(a) A State Agency is acquiring two or more items using separate Financing Agreements when the total principal sum of the Financing Agreements exceeds $100,000;

(b) The items perform or contribute to the same general function at a particular location or as part of an interdependent system; and

(c) Are proposed to be acquired under a continuing appropriation or within the same biennium.

(4) If the principal amount of the Financing Agreement exceeds $100,000, it must be executed by the Director. The form of the proposed agreement must be submitted to and approved by the Director at least 14 business days before the expected closing of the financing.

(5) The Director is the only state officer authorized to enter into Financing Agreements under ORS 283.087 to 283.092. The Deputy Director may execute a Financing Agreement in lieu of the Director under ORS 184.335.

(6) In cases of Financing Agreements approved in writing by the State Treasurer, or the Treasurer’s designee, and the Director to acquire equipment through the Department of Administrative Services, State Services Division in accordance with the Public Contracting Code, the Director's approval of the terms of a proposed Financing Agreement, with such changes, if any, as are authorized by the Director, will serve as direction to the State Services Division Administrator to execute the Financing Agreement under the Director's authority.

(7) Requests for approval of Financing Agreements will be made in the manner, and on forms as directed by the Department.

Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: BMD 1-2012, f. 1-26-12, cert. ef. 2-1-12

122-070-0140

Records Creation and Maintenance, and Ongoing Use of Financed Assets

(1) In conjunction with the execution of a Financing Agreement, the Benefiting Agency must enter into a written agreement with the Director outlining the Benefiting Agency’s responsibilities related to asset maintenance, recordkeeping and debt repayment. The agreement must include, without limitation, the following terms:

(a) Identification of the source of funds the Benefiting Agency intends to use to repay the Financing Agreement;

(b) A commitment by the Benefiting Agency:

(A) To use its best efforts to seek funds and budget authority each biennium to repay the Financing Agreement so long as it is outstanding;

(B) To inform the Finance Manager in the event available funds expected to be used to repay any Financing Agreement are not appropriated;

(C) That the financed property will be used only by state government and only for authorized government purposes, unless the Benefiting Agency first obtains written consent from the Finance Manager; and

(D) To not to lease, sublease, sell or otherwise encumber any financed property without prior written consent from the Finance Manager.

(2) A Benefiting Agency may not permit the property to be used by anyone except state government for authorized government purposes, lease, sublease, sell or otherwise encumber any property, unless it first obtains written consent from the Finance Manager.

(3) Prior to software or property acquisition or development of capital assets, each Benefiting Agency will certify that all software, property or capital assets paid for through a Financing Agreement are essential to providing the governmental functions that the Benefiting Agency performs and that the property is free and clear of all liens and encumbrances.

(4) Benefiting Agencies must cooperate with the Department and the State Treasurer in their efforts to comply with provisions of the Internal Revenue Code and regulations related to Tax-advantaged Financing Agreements.

(5) Benefiting Agencies must:

(a) Record the appropriate accounting entries for all Financing Agreements related to their project(s) in accordance with generally accepted accounting principles and the State Accounting Manual;

(b) Maintain all records related to asset acquisition or development through a Financing Agreement, and ongoing use of the asset in compliance with state law and provisions of the Internal Revenue Code;

(c) Prepare and file Form 1099 and other tax documents required as a result of payment to vendors or contractors for asset acquisition or development; and

(d) File all forms and take any other required action related to tax matters, including those to ensure ongoing compliance with the Internal Revenue Code, as requested by the Finance Manager for Financing Agreements that are Tax-advantaged borrowings. Costs incurred by the Department related to tax compliance, including but not limited to the fees of bond counsel, financial advisors, Department of Justice counsel, or other experts, will be the responsibility of the Benefiting Agency.

(6) The Department and Benefiting Agency will retain records related to Financing Agreements and projects financed for three (3) years beyond the scheduled final maturity date. The Benefiting Agency must respond promptly to any requests for information from the Department related to a Financing Agreement.

(7) The Department will:

(a) Assist any Benefiting Agency in developing debt service budgets for its outstanding Financing Agreements;

(b) Bill and collect from all Benefiting Agencies their respective portion of debt service relative to each Benefiting Agency’s outstanding Certificates of Participation and, if not paid directly by the Benefiting Agency, other Financing Agreements;

(c) Send moneys that are collected from Benefiting Agencies to a trustee for payments due under the Certificates of Participation, or any moneys so collected for other applicable Financing Agreements related to such Benefiting Agencies;

(d) At the direction of the State Treasurer, manage the investments of all Certificates of Participation sale proceeds or debt service funds that are held by a trustee. At the end of each debt service cycle, the earnings from any investment of moneys by a trustee may be credited to the appropriate Benefiting Agency or may be credited against the interest due on outstanding certificates at the next payment date, at the discretion of the Department. When allocating such interest earnings, the Department may take any actions necessary to achieve cost-effective administration, provided such actions do not have a materially adverse impact on any outstanding certificates or the funds or accounts used to pay them; and

(e) After the Certificates of Participation, or other Financing Agreements, for which moneys held by a trustee are completely paid and no longer outstanding, provide to the appropriate Benefiting Agency any remaining moneys, together with interest earnings to be recorded under generally accepted accounting principles.

Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: BMD 1-2012, f. 1-26-12, cert. ef. 2-1-12

122-070-0150

Management of Proceeds

(1) All proceeds from Financing Agreements must be separately accounted for and held in separately designated accounts in the Oregon State Treasury or with an independent trustee. The Benefiting

Agency and the Department shall exchange information to ensure that the proceeds are spent only on lawfully authorized expenditures and, if funded with a Tax-advantaged Financing Agreement, are in compliance with any provision of the Internal Revenue Code and applicable regulations. The Benefiting Agency shall consult with the Department and follow its directives with respect to appropriate accounting and record keeping for such expenditures.

(2) Any reserve account equal to the maximum allowable reserve authorized in the Internal Revenue Code at the time Certifications of Participation are issued will be held by an independent trustee. Interest earnings on the reserve will be used to pay debt service on the certificates, after the payment of any arbitrage earnings payable under the Internal Revenue Code, when due.

(3) The Department will not disburse to a local government or other public body the proceeds of any Financing Agreement(s) entered into for the purposes of infrastructure described in ORS 283.085(4)(a)(B) or (C) until the recipient of the proceeds has entered into an agreement with the State of Oregon that is in form and substance satisfactory to the Director regarding the deposit and expenditure of the proceeds, nature and use of the project(s) to be financed with the proceeds and, if applicable, compliance with provisions of the Internal Revenue Code and procedures necessary to maintain the Tax-advantaged status of the Financing Agreement from which the proceeds were derived.

Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: BMD 1-2012, f. 1-26-12, cert. ef. 2-1-12

122-070-0160

Charges for Administering Financing Agreements

(1) Administrative Costs:

(a) All costs incurred by the Department and the State Treasurer to administer outstanding Financing Agreements will be charged to the appropriate Benefiting Agency.

(b) Actual charges for fiscal agent services and trustee services for any Financing Agreements will be passed through to the Benefiting Agency.

(c) All other costs incurred by the Department, including bond counsel or other legal fees, to administer outstanding Financing Agreements will be charged to the appropriate Benefiting Agency.

(d) The Capital Investment Section shall charge fees in connection with the services, duties and activities related to issuance and approval of Financing Agreements to the appropriate Benefiting Agency on behalf of the Department.

(2) New issues of Financing Agreements, excluding Certificates of Participation:

(a) Vendor financing or third party financing of equipment acquisitions will be charged a fee of $1,000.

(b) Owner Financing Agreements providing for the acquisition of real property will be charged a fee of $2,500.

(c) Third party Financing Agreements provided by private parties to finance real property purchases will be charged a fee of $5,000.

(d) Any other type of Financing Agreement not specifically addressed in this section will be charged based on a negotiated fee.

(3) Sale of Certificates of Participation:

(a) For a single series sale with a single project, Benefiting Agency will be charged $26,000.

(b) For a single series sale with more than one project, Benefiting Agency will be charged $35,000, plus $2,500 for each project beyond three to a maximum amount of $50,000. The charge will be prorated among the projects financed based upon the principal amount allocated to each project.

(c) For a multiple series sale with a single project, Benefiting Agency will be charged $26,000 for the initial series and a fee of $20,000 per additional series issued.

(d) For a multiple series sale with more than one project, Benefiting Agency will be charged $35,000 plus $2,500 for each project beyond three to a maximum amount of $50,000 for each series. Furthermore, the Benefiting Agency will be charged a fee of $20,000 per additional series issued. The charges will be prorated among the projects financed based upon the principal amount allocated to each project.

(4) Refunding Sales of Certificates of Participation:

(a) A fee of $25,000 will be charged for advance refundings of outstanding series per series refunded.

(b) A current refunding will be charged as an additional project under a Sale of Certificates of Participation in section (3) above.

(5) Defeasance of Certificates of Participation: For the economic or legal defeasance of outstanding Certificates of Participation or other Financing Agreements, the Department will charge a fee of $10,000.

(6) Arbitrage Calculations:

(a) The Benefiting Agency will be charged for the calculation of arbitrage liability for annual statewide financial reporting and for each five year required reporting period.

(b) Each series with a single Benefiting Agency that has unspent proceeds or a reserve funded with proceeds from a Financing Agreement will be charged $1,000 annually when the Capital Investment Section performs and provides the calculation to the Benefiting Agency of the estimated arbitrage liability.

(c) Each series with multiple Benefiting Agencies that has unspent proceeds or a reserve funded with proceeds from a Financing Agreement will be charged $500 annually per Benefiting Agency when the Capital Investment Section performs and provides the calculation to the Benefiting Agency of the estimated arbitrage liability.

(d) The Benefiting Agency will reimburse the Department for the actual costs of the services performed when the calculation and documentation is performed by a private contractor under a professional services contract with the Capital Investment Section.

(e) The Benefiting Agency will reimburse the Department for the direct cost of any work performed by bond counsel, Department of Justice counsel or other contractors hired by the Capital Investment Section to provide assistance related to Internal Revenue Code compliance requirements.

Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: BMD 1-2012, f. 1-26-12, cert. ef. 2-1-12

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