STATE OF OREGON FINANCING AGREEMENTS
122-070-0000
Authority
(1) 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 283 .060 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.
(2) Lottery bond financings are authorized by ORS 286.580 and are to be issued by the State Treasurer with the concurrence of the Director of the Department of Administrative Services.
(3) The State of Oregon acting through the Oregon State Treasurer is authorized by ORS 288.165 to issue and borrow money by entering into a credit agreement, or issuing notes, warrants, short-term promissory notes, commercial paper or other obligations in anticipation of taxes, grants or other revenues. Department of Administrative Services shall account for and administer the proceeds of the obligations and the repayment of the obligations.
(4) The Director of the Oregon Department of Administrative Services ORS 353.559 Sec. 18, as directed by the State Treasurer, may issue general obligation bonds, obtain credit enhancement to provide additional security or liquidity for general obligation bonds, enter into security documents with a bond trustee, establish one or more debt service reserve accounts for the purpose of paying bond debt service, to pay any costs and expenses of issuing or administering the general obligation bonds, and establish a process to allow for repayment of the bonds with proceeds under the Master Settlement Agreement by any of the United States tobacco products manufacturers as directed by the Legislative Assembly or other sources of funds identified as the source of repayment.
(5) The Department of Administrative Services shall develop the cash flow forecast, account for the proceeds, pay all issuance costs ORS 310.140 (actual costs) and administer the repayment of Short Term Borrowings ORS 293 as amended by Senate Bill 1002 71st Legislative Assembly - 2002 Special Session. Short Term Borrowings are also know as tax anticipation notes (TAN's)
(6) Oregon Appropriation Bonds are authorized, ORS 293.537 as amended by SB 856 of the 72nd Oregon Legislative Assembly in regular session, to be issued by the State Treasurer with the concurrence of the Director of the Department of Administrative Services.
Stat. Auth.: ORS
184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: GS 15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f.
4-11-96, cert. ef. 4-15-96; Renumbered from 125-023-0000; BMD
4-2003(Temp), f. & cert. ef. 9-24-03 thru 3-22-04; BMD 7-2003, f.
& cert. ef. 12-4-03
122-070-0010
Definition of Financing Agreements
(1) ORS 283 .085(4) defines a financing agreement as: A lease purchase agreement, an installment sale agreement, a loan agreement, or any other agreement to finance real or personal property which is or will be owned and operated by the state or any of its agencies.
(2) Distinguishing between a financing agreement and an operating lease:
(a) The transaction is a financing agreement if it meets one of the following criteria:
(A) The agreement transfers ownership of property to the state or any of its agencies when the agreement ends;
(B) The agreement contains a nominal or bargain purchase option. A nominal or bargain purchase is a price less than fair market value at the time of purchase;
(C) The term of the agreement is 75% or more of the economic useful life of the property;
(D) The present value of the minimum payments under the agreement is at least 90% of the current fair market value of the property. Minimum agreement payments include any penalty for terminating the agreement.
(E) Leasing a real property asset built on state owned land will be classified as a financing lease unless the Director of the Department of Administrative Services determines it is an operating lease.
(b) Operating leases are not subject to ORS 283.085-283.092.
(3) Characteristics of various forms of financing agreements:
(a) Certificates of Participation (COPS) are a form of financing agreement characterized by the following features:
(A) Each certificate represents an ownership interest in and a right to receive (1) a portion of the principal component of the loan payments to be paid by the State pursuant to the terms of the loan agreement and (2) a portion of the interest component of the loan payment.
(B) The State's obligation to make loan payments is subject to legislative appropriation.
(C) Originally offered and sold widely on the regional and national municipal security markets;
(D) Actively sold and resold throughout their life on the municipal securities market;
(E) Involves an independent, third party trustee to execute the terms of the COP financing agreement;
(F) Rated by a nationally recognized credit analysis corporation.
(b) Privately placed financing agreements are another form characterized by the following features:
(A) Offered to a select number of sophisticated investors or investment institutions;
(B) Not usually rated by a credit analysis corporation.
(c) Vendor or Owner financing is another form characterized by the following features:
(A) Agreement between the state or any of its agencies and the existing owner, manufacturer or retailer to pay for a product purchased over time;
(B) Not rated by a credit analysis corporation.
Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: GS 15-1992, f. & cert. ef.
7-24-92; BMD 1-1996, f. 4-11-96, cert. ef. 4-15-96, Renumbered from
125-023-0010; BMD 4-2003(Temp), f. & cert. ef. 9-24-03 thru
3-22-04; BMD 7-2003, f. & cert. ef. 12-4-03; BMD 1-2006, f. &
cert. ef. 9-11-06
122-070-0020
Finance Agreements Subject to ORS 283.087 to 283.092
(1) Any acquisition by the state or any state agency (agency), of a project using a financing agreement whose principal portion exceeds $100,000 must follow the procedures established in ORS 283.087 to 283.092.
(2) A "single project" may not be divided into parts with each part being less than $100,000, to escape the financing agreement approval process.
(3) A "single project" for these purposes will be determined to exist if:
(a) The state or any state agency is acquiring two or more items using separate financing agreements when the total principal sum of the financing agreements exceeds $100,000; and
(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.
Stat. Auth.: ORS
184.340
Stats. Implemented: ORS 283.085 - ORS 283.092
Hist.: GS 15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f.
4-11-96, cert. ef. 4-15-96, Renumbered from 125-023-0020
122-070-0030
All Financing Agreements Whose Principal Portion Exceeds $100,000 Are to Be Executed in Name of the Department of Administrative Services Director
(1) The Director of the Department of Administrative Services (Director) is the only party with the authority to enter into financing agreements under ORS 283.087 to 283.092.
(2) In cases of financing agreements approved in writing by the Treasury and the Department of Administrative Services to acquire equipment being procured through the Department of Administrative Services, State Services Division in accordance with ORS chapter 279, the Director's approval of the financing agreement will serve as direction to the State Services Division Administrator to sign the financing agreement under the Director's authority.
Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: GS 15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f.
4-11-96, cert. ef. 4-15-96, Renumbered from 125-023-0030; BMD
4-2003(Temp), f. & cert. ef. 9-24-03 thru 3-22-04; BMD 7-2003, f.
& cert. ef. 12-4-03; BMD 1-2006, f. & cert. ef. 9-11-06
122-070-0040
Budget Confirmations of All Finance Agreement Requests
(1) The Department of Administrative Services, Finance Manager will notify the Department of Administrative Services, Budget and Management Division of each request for property acquisition using financing agreements whose principal portion exceeds $100,000.
(2) The notification will indicate:
(a) Agency and division making request;
(b) Amount of principal requested.
(3) The Finance Manager will request the Budget and Management Division to confirm:
(a) Requesting Agency has the budget authority to purchase the item requested;
(b) Requesting Agency has the budget authority to make finance agreement repayments for the remainder of the existing biennium;
(c) Requesting Agency's budget is not subject to monitoring by the Department of Administrative Services, in which case the Requesting Agency will verify it's budget authority to purchase the item.
Stat. Auth.: ORS
184.340
Stats. Implemented: ORS 283.085 - ORS 283.092
Hist.: GS 15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f.
4-11-96, cert. ef. 4-15-96, Renumbered from 125-023-0040
122-070-0050
Finance Agreement Budget Approval Process
(1) Any State department or agency intending to acquire real property or personal property using any form of financing agreement in the upcoming biennium should notify the Department of Administrative Services, Finance Manager and the Budget and Management Division, as a part of the budget preparation process:
(a) The Department of Administrative Services will work through the Budget and Management Division's budget analysts and directly with departments or agencies to identify projects expected to be financed:
(A) In June of each even numbered year the Department of Administrative Services will survey all agencies and each budget analyst to identify potential projects;
(B) The Department of Administrative Services will manage requests for financing agreements for purposes of preparing a recommendation to the Governor on the finance agreement issuance limitation for the upcoming biennium as required in ORS Chapter 286;
(C) The Department of Administrative Services will coordinate that request through the budget review and approval process, representing all departments and agencies requesting the use of financing agreements;
(D) The Department of Administrative Services will be responsible for managing the use of the approved limitation throughout the biennium;
(E) Departments and agencies which identified the need for financing agreements in response to the survey will receive priority in the event the demand exceeds the available limitation.
(b) Project acquisitions not approved for financing as part of the budget approval process may not be approved for financing;
(c) ORS 276.429 sets state policy regarding acquiring office quarters for state agencies:
(A) The policy states the Department of Administrative Services will consider cost and long term best interests of the state in determining which method of acquisition to use;
(B) Authorized methods include operating leases, operating leases with an option to purchase or financing agreements as defined by ORS 283.085(4);
(C) Prior to acquiring an office quarters project by a financing agreement, which has not been approved by the legislative assembly, the Department of Administrative Services will report the planned action to the legislative review agency established in ORS 291.371.
(2) The Department of Administrative Services automated purchasing system will be used to identify equipment financings whose principal portion exceeds $100,000:
(a) The automated purchasing system is designed to indicate whether equipment purchases are intended by the department or agency to be financed in a manner subject to ORS 283.087. In response to requests:
(A) The Department of Administrative Services will contact the department or agency acquiring the equipment to identify the circumstances and terms of the proposed financing;
(B) The Department of Administrative Services will recommend the form of financing agreement to the State Treasurer based on:
(i) Cost effective advantages financing may offer;
(ii) The form of financing agreement which is appropriate for that specific purchase;
(iii) Options, such as prepayment, that the terms of the financing agreement used should contain;
(iv) Availability of finance agreement limitation in the fiscal year the equipment is expected to be acquired.
(b) Requests for financing on all real property projects will be made to the Finance Manager of the Department of Administrative Services.
(3) Department or Agency Responsibilities:
(a) The department or agency proposing the financing will identify the source of funds it intends to use to repay the financing agreement;
(b) The department or agency will commit to make its best efforts to seek funds and budget authority to repay the financing agreement so long as it is outstanding;
(c) The department or agency agrees to inform the Department of Administrative Services in the event available funds expected to be used to repay any financing agreement are not appropriated;
(d) The department or agency using the property will not permit any of the property to be used by anyone except the State for authorized government purposes unless it first obtains written consent from the Department of Administrative Services and an opinion from a nationally recognized bond counsel;
(e) The department or agency promises not to lease, sublease, sell or otherwise encumber the real property or personal property acquired with a financing agreement without prior written consent of the Department of Administrative Services;
(f) Prior to property acquisition, each department or agency will certify that all property purchased with a financing agreement is essential to providing the government functions that department or agency performs. Each department or agency will also certify that the property is free and clear of all liens and encumbrances;
(g) Proposed acquisitions expecting to use COPs will require that requesting department or agency and the Department of Administrative Services to enter a letter of commitment prior to the COP preparation. The letter will express the commitment of the department or agency to follow through on the financing. It will also clarify the nature of the financing needs of the project;
(h) After each COP financing is executed, each department or agency will enter into an agreement with the Department of Administrative Services. The agreement will outline the project care and repayment responsibilities of the department or agency and the Department of Administrative Services;
(i) Departments and agencies are responsible to cooperate with the Department of Administrative Services and the State Treasurer in their efforts to comply with provisions of the Internal Revenue Code and regulations;
(j) Departments and agencies are responsible for recording the appropriate accounting entries for all financing agreement transactions related to their project.
[Publications: Publications referenced are available from the agency.]
Stat. Auth.: ORS
184.340
Stats. Implemented: ORS 283.085 - ORS 283.092
Hist.: GS 15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f.
4-11-96, cert. ef. 4-15-96, Renumbered from 125-023-0050
122-070-0060
Management of All COP Funds
(1) The Department of Administrative Services will be responsible for managing the investments of all COP funds in coordination with the State Treasurer.
(2) Records of COP fund balances and interest earnings:
(a) The Department of Administrative Services will retain records of all transactions related to COPs;
(b) The Department of Administrative Services will calculate the reasonable distribution of interest earnings on a single financing agreement account which funds independent projects of separate departments or agencies;
(c) The Department of Administrative Services will report, to agencies participating in COP funds, the account interest earnings and account balances at the close of every fiscal year.
(3) COP payment from agencies:
(a) All departments or agencies with projects funded by outstanding COP series will make repayment of principal and interest as prescribed in the respective interagency agreement with the Department of Administrative Services;
(b) COP payments will be a fixed amount for a semi-annual cycle:
(A) The Trustee in accordance with the terms of Trust agreements between the Department of Administrative Services and Trustee, will accumulate COP payments;
(B) The Trustee will invest payments. Earnings will be credited to the respective departments or agency’s payment account;
(C) At the end of every payment cycle the interest earnings on payments accumulated during the cycle will be credited against the COP interest due the next cycle;
(D) When the end of a payment cycle marks the end of the entire COP obligation, any accumulated interest earnings remaining after all obligations are paid will be provided to the department or agency.
Stat. Auth.:
ORS 184.340
Stats. Implemented:
ORS 283.085 - 283.092
Hist.: GS
15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f. 4-11-96, cert. ef. 4-15-96,
Renumbered from 125-023-0060; BMD 4-2003(Temp), f. & cert. ef. 9-24-03 thru
3-22-04; BMD 7-2003, f. & cert. ef. 12-4-03; BMD 2-2007(Temp), f. & cert.
ef. 10-8-07 thru 4-4-08; Administrative correction 4-22-08
122-070-0065
Management of All Bond and Note proceeds
(1) All costs incurred by the Department of Administrative Services and State Treasurer in the prudent management efforts of outstanding general obligation, revenue bond or note proceeds will be charged to the department or agency served by the bonds.
(2) All project proceeds will be held in designated accounts at the Oregon State Treasury. The agency and the Department of Administrative Services shall cooperate to record the expenditure of the bond proceeds for all legal expenditures and to comply with the provisions of the Internal Revenue Code and regulations.
(3) Any reserve account equal to the maximum allowable reserve authorized in federal tax code at the time the bonds are issued shall be held by an independent Trustee. Interest earnings on the reserve shall be used to pay debt service on the related bonds after the payment of any arbitrage earnings payable under federal tax code, when due.
Stat. Auth.: ORS
184.340
Stats. Implemented: ORS 286 .560
Hist.: BMD 4-2003(Temp), f. & cert. ef. 9-24-03 thru 3-22-04; BMD
7-2003, f. & cert. ef. 12-4-03
122-070-0070
Trustee and Fiscal Agent Charges
(1) Annual charges for Fiscal Agent services and Trustee services for any of the bond, COP or note programs administered by the Department will be passed through to the department or agency served by the respective bond, COP or note series or portions of a series.
(2) All other costs incurred by the Department of Administrative Services in the prudent management efforts of outstanding financing agreements will be charged to the department or agency served by the respective financing agreement.
Stat. Auth.: ORS
184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: GS 15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f.
4-11-96, cert. ef. 4-15-96, Renumbered from 125-023-0070; BMD
4-2003(Temp), f. & cert. ef. 9-24-03 thru 3-22-04; BMD 7-2003, f.
& cert. ef. 12-4-03
122-070-0080
Fees
(1) ORS 283.089(8) permits the Department of Administrative Services to bill every state agency benefiting from the use of financing agreements, for the costs incurred in preparing and executing them. Those costs include but are not limited to:
(a) Underwriting costs;
(b) Finance agreement repayment insurance;
(c) State Treasury, Auditor, Bond Counsel, Financial Consultant, and Attorney General fees;
(d) Credit rating charges, official statement printing costs.
(e) Federal tax code compliance calculations and documentation.
(2) Schedule of the Department of Administrative Services' charges:
(a) New issues of financing agreements:
(A) Vendor financing or third party financing of equipment acquisitions will be processed by the Department of Administrative Services and 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) Public sale of all bond, certificate and note issuance including but not limited to Certificates of Participation (COP), Lottery Revenue Bonds, Appropriation Bonds, tax anticipation notes and Oregon Opportunity General Obligation bonds will be charged as follows:
(i) Single project financing will be charged $18,500;
(ii) A single financing, funding more than one project will be charged $25,000. The charge will be prorated among the projects financed;
(iii) If more than one financing is sold in a combined offering the charge will be $15,000 per series issued.
(b) Advance refundings of outstanding series will be charged $15,000 per series refunded.
(c) Annual calculations of arbitrage liability for statewide financial reporting and each five year reporting period will be reimbursed as follows:
(d) If the calculation and documentation is performed by the Department of Administrative Services, Budget and Management Division, Capital Investment Section (CIS):
(A) Each bond series with a single beneficiary agency that has project money unspent or a bond funded reserve will be charged $1,000 annually each August when CIS provides the calculation to the agency of the estimate of arbitrage liability.
(B) Each bond series with multiple beneficiary agencies that has project money unspent or a bond funded reserve will be charged $500 annually per agency each August when CIS provides the calculation to the agency of the estimate of arbitrage liability. If the calculation and documentation is performed by a private contractor under a professional service contract with CIS, the agency will reimburse CIS for the costs of the service performed. Agencies will reimburse CIS for the direct cost of any work performed by CIS bond counsel related to federal tax code compliance requirements.
(e) Defeasance of public debt outstanding on a program administered by the Department of Administrative Services will be charged a fee of $7,500.
Stat. Auth.: ORS 184.340
Stats. Implemented: ORS 283.085 - 283.092
Hist.: GS 15-1992, f. & cert. ef. 7-24-92; BMD 1-1996, f.
4-11-96, cert. ef. 4-15-96, Renumbered from 125-023-0080; BMD
4-2003(Temp), f. & cert. ef. 9-24-03 thru 3-22-04; BMD 7-2003, f.
& cert. ef. 12-4-03; BMD 1-2006, f. & cert. ef.
9-11-06
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