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NO. 121. AN ACT RELATING TO A VERMONT INDEPENDENT SCHOOL FINANCING AUTHORITY.

(S.146)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. 24 V.S.A. chapter 133 is added to read:

CHAPTER 133. VERMONT INDEPENDENT SCHOOL FINANCE AUTHORITY

§ 5251. DEFINITIONS

The following definitions shall apply throughout this chapter unless the context clearly requires otherwise:

(1) “Authority” means the Vermont independent school financing authority established by section 5255 of this title.

(2) “Bonds” means bonds of the authority issued under this chapter.

(3) “Cost” as applied to any facilities may embrace the cost of construction, the cost of acquisition, including the acquisition of all lands, structures, property, rights, rights-of-way, franchises, easements and interests in land required for the construction or operation of any facilities, the cost of demolishing or removing any buildings or structures upon land acquired hereunder, including the cost of acquiring any lands to which the buildings or structures may be moved, the cost of all furnishings, equipment and machinery, financing charges, interest prior to and during construction or acquisition and, if deemed advisable by the authority, for a period not exceeding two years after completion of construction or acquisition, provision for reserves, the cost of architectural, engineering, financial and legal services, plans and specifications, studies, surveys, estimates of cost and of revenue, administrative expenses, expenses necessary or incident to determining the feasibility of the facilities, and any other expenses as may be necessary or incident to the construction or acquisition of the facilities, the financing thereof and the placing of the facilities in operation. Any obligation or expense incurred by the authority prior to the issuance of bonds for the facilities in connection with any of the foregoing items may be included as part of the cost. There may be included as part of the cost the payment or reimbursement to an educational institution of its expenditures for any of the foregoing items and the refinancing of indebtedness of an educational institution incurred to pay any of the foregoing items.

(4) “Educational institution” means an independent school as defined by section 11(a)(8) of Title 16 that serves as the public high school for the region, which is principally supported by public taxation or tuition payments derived from public funds, and demonstrates a significant history of meeting fiscal obligations. “Educational institution” shall include the Austine School for the Deaf and Hard of Hearing.

(5) “Facilities” means all or any part of any building, improvements to real property, equipment, furnishings, appurtenances, utilities and other property, real or personal, determined by the authority to be necessary or convenient in the operation of any educational institution, including facilities previously acquired or constructed by such educational institution.

(6) “General fund” means the fund established under section 5289 of this title.

(7) “Financing agreement” means the agreement or agreements between the authority and any educational institution in respect of any facilities for such educational institution, under which the payments to the authority shall be at least sufficient to pay all of the principal of and interest and any redemption premiums on, and to provide and maintain any reserves for, the bonds or notes that shall be issued by the authority to pay the cost of such facilities, and to pay the expenses of the authority in connection therewith, and without limiting the generality thereof, may consist of an agreement of lease, an installment sale contract, a purchase agreement, a security agreement, a conditional sale agreement, a loan agreement, a mortgage of real property, a purchase money mortgage, a lease and a lease-back, a lease or leases directly or indirectly with the educational institution, or such other financing agreement or any combination of the foregoing, as the authority may determine.

(8) “Issue,” when used in reference to bonds or notes, means the physical delivery thereof or the effectuation thereof in book entry form, in each case against payment therefor.

(9) “Maximum debt service” means, as of any date of computation, the largest amount of money required by the terms of all contracts between the authority and its bondholders to be raised in any succeeding calendar year for the payment of interest on and maturing principal of outstanding bonds and payments required by the terms of any contracts to sinking funds established for the payment or redemption of bonds, all calculated on the assumption that the bonds will cease to be outstanding after date of the computation by reason of the payment of the bonds at their respective maturities and the payments of the required moneys to sinking funds and the application thereof in accordance with the terms of all contracts to the retirement of bonds.

(10) “Notes” means any notes of the authority issued under this chapter.

(11) “Reserve fund” means the Vermont school financing authority reserve fund established by section 5284 of this title.

(12) “Required debt service reserve” means, as of any date of computation, the amount or amounts required to be on deposit in the reserve fund as provided by resolution of the authority. Required debt service reserve shall not be required by resolution of the authority to exceed maximum debt service.

(13) “Revenues” means all fees, charges, moneys, profits, payments of principal of or interest on loans and other investments, gifts, grants, contributions, appropriations and all other income derived or to be derived by the authority under this chapter.

§ 5252. LAW GOVERNING

It is the intent of the general assembly that in the event of any conflict or inconsistency in the provisions of this chapter and any other laws pertaining to matters herein established or provided for or in any rules adopted under this chapter or other laws, to the extent of such conflict or inconsistency, the provisions of this chapter shall be enforced and the provisions of the other laws and rules adopted thereunder shall be of no effect.

§ 5253. LIBERAL CONSTRUCTION

This chapter shall be construed liberally to effectuate the legislative intent and the purposes of the chapter as complete and independent authority for the performance of each and every act and thing herein authorized and all powers herein granted shall be broadly interpreted to effectuate that intent and those purposes and not as a limitation of powers.

§ 5254. ADMINISTRATION EXPENSES

All expenses incurred in carrying out this chapter are payable solely from revenues or funds provided under this chapter and nothing in this chapter authorizes the authority to incur any indebtedness or liability on behalf of or payable by the state.

§ 5255. VERMONT INDEPENDENT SCHOOL FINANCE AUTHORITY; ESTABLISHED

There is hereby established a body corporate and politic, with corporate succession, to be known as the Vermont independent school finance authority. The authority is hereby constituted as an instrumentality exercising public and essential governmental functions, and the exercise by the authority of the powers conferred by this chapter are deemed to be an essential governmental function of the state. It is hereby declared to be in the public interest and to be the policy of the state to foster and promote by all reasonable means the provision of adequate capital markets and facilities for borrowing money by certain educational institutions which provide educational services to most students in their locality at as low a cost as possible. It is in the public interest and is the policy of the state to assist them by making funds available at reduced interest costs for orderly financing of improvements for such educational institutions, particularly for those institutions not otherwise able to borrow for those purposes. It is further declared that the state should exercise its powers in the interest of such educational institutions to further and implement those policies by authorizing a state instrumentality to be created as a body corporate and politic to have full powers to borrow money and to issue its bonds and notes to make funds available through the facilities of that instrumentality at reduced rates and on more favorable terms for borrowing and by granting broad powers to the instrumentality to accomplish and to carry out the aforesaid policies of the state which are in the public interest of the state and of its taxpayers and residents. It is further declared to be in the public interest and is the policy of the state that state funds should be applied or authorized to be paid to the state instrumentality created pursuant to this act only to provide adequate assurance and security to the holders of bonds or notes of such instrumentality; and further that such instrumentality should so conduct its operations as to provide the lowest rates as is consistent with a

self-supporting operation with no expectation of subsidization with state funds.

§ 5256. MEMBERSHIP

The authority shall consist of the directors of the Vermont municipal bond bank established by chapter 119 of this title.

§ 5257. OFFICERS; QUORUM

The chair of the Vermont municipal bond bank shall be the chair of the authority. The directors shall elect a secretary and a treasurer who need not be directors, and the same person may be elected to serve both as secretary and treasurer. The powers of the authority are vested in the directors thereof and three directors of the authority shall constitute a quorum. Action may be taken and motions and resolutions adopted by the authority at any meeting thereof by the affirmative vote of at least three directors of the authority. A vacancy in the directorship of the authority shall not impair the right of a quorum to exercise all the powers and perform all the duties of the authority.

§ 5258. COMPENSATION; EXPENSES

The directors of the authority shall receive a per diem compensation in the amount authorized to be paid to the directors of the Vermont municipal bond bank for each day devoted to official duties and reimbursement for actual expenses necessarily incurred in the discharge of their duties. Notwithstanding any other law, an officer or employee of the state shall not be deemed to forfeit his or her office or employment or any benefits thereof by reason of his or her acceptance of the office of director of the authority.

§ 5259. STAFF

The authority may employ such officers, agents and employees as it may require and determine their qualifications, terms of office, duties and compensation all without regard to chapter 13 of Title 3.

§ 5260. STATE TREASURER

To the extent that the state treasurer is the custodian of any moneys payable to an educational institution at any time subsequent to written notice to him or her from the authority that the educational institution is in default on the payment of principal or interest under any financing agreement with the authority, the state treasurer must withhold the payment of that money from that educational institution until the amount of the principal or interest then due and unpaid has been paid to the authority, or until the state treasurer has been advised that arrangements, satisfactory to the authority, have been made for the payment of the principal and interest.

§ 5261. ANNUAL REPORT; AUDIT

On or before March 31 of each year, the authority shall report on its activities for the preceding calendar year to the governor and to the general assembly. Each report shall set forth a complete operating and financial statement covering its operations during the year. The authority shall cause an audit of its books and accounts to be made at least once in each year by certified public accountants and the cost thereof shall be considered an expense of the authority and a copy thereof shall be filed with the state treasurer.

§ 5262. ANNUAL BUDGET

(a) On or before December 1 of each year, the authority shall adopt an annual budget for the succeeding year. The budget shall set forth the general categories of expected expenditures and the amount on account of each and shall include a provision or reserve for contingencies or overexpenditures as well as any additional material as the authority may determine. Copies of the annual budget certified by the chair of the authority shall be promptly filed with the state treasurer and the commissioner of finance and management and the annual budget shall not be effective until it is so filed.

(b) If for any reason the authority does not adopt the annual budget on or before December 1, the budget for the preceding year shall be in effect for that year until the annual budget for the year is adopted.

(c) The authority may at any time adopt an amended annual budget for the current calendar year, but the amended annual budget may not supersede any prior budget until it is filed as required in the case of the annual budget.

§ 5263. GENERAL POWERS

The authority has the following powers for carrying out the purposes of this chapter:

(1) to sue and be sued;

(2) to adopt an official seal and alter it at pleasure;

(3) to make and enforce rules for the conduct of its business and for use of its services and facilities;

(4) to maintain an office at any place within the state;

(5) to acquire, hold, use and dispose of its income, revenues, funds and moneys;

(6) to acquire, rent, lease, hold, use and dispose of other personal property for its purposes;

(7) to borrow money and to issue its negotiable bonds or notes and to provide for and secure the payment thereof and to provide for the rights of the holders thereof, to obtain credit enhancement for such bonds and notes, including from any bank, insurance company, financial institution, or department or agency of the United States of America, and to purchase, hold and dispose of any of its bonds or notes;

(8) to fix and revise from time to time and charge and collect fees and charges for the use of its services or facilities;

(9) to accept gifts or grants of property, funds, money, materials, labor, supplies or services from the United States of America or from any governmental unit or any person, firm or corporation, and to carry out the terms or provisions or make agreements with respect to any gifts or grants, and to do any and all things necessary, useful, desirable or convenient in connection with procuring, acceptance or disposition of gifts or grants;

(10) to do anything authorized by this chapter, through its officers, agents or employees or by contracts with any person, firm or corporation;

(11) to make and execute financing agreements and all other instruments necessary or convenient for the exercise of the powers and functions conferred on the authority under this chapter;

(12) to enter into and enforce all contracts necessary, convenient or desirable for the purposes of the authority or pertaining to any financing agreement, to the performance of its duties and execution or carrying out of any of its powers under this chapter;

(13) to invest any funds or moneys of the authority not then required in the same manner as permitted for investment of funds belonging to the state or held in the treasury, except as otherwise provided by this chapter; and

(14) to do all things necessary, convenient or desirable to carry out the powers expressly granted or necessarily implied in this chapter.

§ 5264. SUPPLEMENTAL POWERS

The authority, in addition to any other powers granted in this chapter, has the following powers:

(1) in connection with any financing agreement, to consider the need, desirability or eligibility of the loan, the ability of the educational institution unit to secure borrowed money from other sources and the costs thereof, and the particular facility to be financed;

(2) to charge for its costs and services in review or consideration of any proposed loan, and to charge therefor whether or not the loan is made;

(3) to establish any terms and provisions with respect to any financing agreement;

(4) to procure insurance against any losses in connection with its property, operations or assets in such amounts and from such insurers as it deems desirable;

(5) to the extent permitted under its contracts with the holders of bonds or notes of the authority, to consent to any modification of the rate of interest, time and payment of any installment of principal or interest, security or any other term of bond or note, contract or agreement of any kind to which the authority is a party; and

(6) to issue its bonds or notes which are not secured by the reserve fund, but which may be secured by such other funds and accounts as may be authorized by the authority from time to time.

§ 5265. FINANCING AGREEMENTS

(a) Any financing agreement authorized by this chapter shall be a general obligation of the educational institution and require that the institution:

(1) represent that, at the time that it executes a financing agreement, it has been assigned a long-term credit rating that is at least investment grade from at least one nationally-recognized rating agency without regard to credit enhancement;

(2) pledge revenues at least equal to annual debt service to the authority to secure the educational institution’s obligations under its financing agreement;

(3) covenant to maintain on semiannual report dates unrestricted assets, as specified by the authority, at least equal to 10 percent of total expenses, as specified by the authority, for the most recent fiscal year;

(4) covenant to have revenues in each year at least equal to 105 percent of operating expenses and debt service on its debt in such year, excluding items such as depreciation and any other items specified by the authority, of which revenues, up to five percent may consist of annual endowment income, or of tuition income collected one-time and held exclusively for this purpose; and

(5) covenant to operate in a nonsectarian and nondiscriminatory manner.

(b) Each educational institution is hereby given the power to make the representations and agree to the covenants set forth in subsection (a) of this section.

(c) In addition to the provisions described in subsection (a) of this section, any financing agreement may contain provisions, which may be a part of the contract with the holders of the bonds or notes of the authority, as to:

(1) pledging all or any part of the moneys, earnings, income and revenues of the educational institution, to secure payments required under the terms of the financing agreement;

(2) the rates, rental fees and other charges to be fixed and collected by the educational institution, the amounts to be raised in each year thereby, and the use and disposition of those moneys, earnings, income and revenues;

(3) the setting aside of reserves and the creation of special funds and the regulation and disposition thereof;

(4) the procedure, if any, by which the terms of the financing agreement may be amended, the amount of bonds or notes the holders of which must consent thereto, and the manner in which the consent may be given;

(5) vesting in a trustee or trustees such specified properties, rights, powers and duties as shall be deemed necessary or desirable for the security of the holders of the bonds or notes of the authority issued for the facility;

(6) the obligations of the educational institution with respect to the replacement, reconstruction, maintenance, operation, repairs and insurance of its facilities;

(7) defining the acts or omissions to act constituting a default in the obligations and duties of the educational institution under a financing agreement, and providing for the rights and remedies of the authority of its bondholders or noteholders if default occurs; and

(8) any other matters of like or different character, which may be deemed necessary or desirable for the security or protection of the authority or the holders of its bonds or notes.

(d) Whenever the authority finances a facility for any educational institution, the educational institution shall be responsible for the operation, maintenance and replacement costs thereof, and the covenant to pay under the financing agreement shall be absolute and unconditional.

(e) To obtain funds for the acquisition or construction or financing of any facilities and for other purposes authorized under this chapter, the authority may from time to time issue negotiable bonds and notes as provided in this chapter.

§ 5266. LOANS TO EDUCATIONAL INSTITUTIONS

The authority, for the purpose of this chapter, may lend money to educational institutions by executing financing agreements with such educational institutions for the purpose of financing or refinancing the cost of facilities for the educational institutions. The authority, under this chapter, may issue its bonds and notes and may otherwise assist educational institutions as provided in this chapter.

§ 5267. AMOUNT AND PURPOSE; GENERAL OBLIGATION

(a) The authority may issue its bonds or notes in such principal amounts as it shall deem necessary to provide funds for any purposes under this chapter, including:

(1) the making of loans to an educational institution for the purpose of financing or refinancing the cost of facilities for such educational institution;

(2) the payment, funding or refunding of the principal of, or interest or redemption premiums on, any bonds or notes issued by it whether the bonds or notes or interest to be funded or refunded have or have not become due; and

(3) the establishment or increase of reserves to secure or to pay bonds or notes or interest thereon and all other costs or expenses of the authority incident to and necessary or convenient to carry out its corporate purposes and powers.

(b) The principal amount of bonds and notes which may be outstanding at any time shall not exceed $25,000,000.00, excluding the principal amount of bonds or notes which have been refunded by any bonds or notes issued under this chapter.

(c) Except as otherwise provided herein or by the authority, every issue of bonds or notes shall be general obligations payable out of any revenues or funds of the authority, subject only to any agreements with the holders of particular bonds or notes pledging any particular revenues or funds. Any bonds or notes may be additionally secured by a pledge of any grant or contributions from the United States of America or the state or any governmental unit or any person, firm or corporation or a pledge of any income or revenues, funds or moneys of the authority from any source whatsoever.

§ 5268. FORM OF ISSUANCE

(a) Bonds or notes of the authority shall be authorized by resolution of the authority and may be issued in one or more series and shall bear such date or dates, mature at such time or times, bear interest at such rate or rates of interest per annum or within such maximum rate, be in such denomination or denominations, be issued in coupon form payable to bearer, in registered form or in book entry form, carry such conversion or registration privileges, have such rank or priority, be executed in such manner, be payable from such sources in such medium of payment at such place or places within or without the state, and be subject to such terms of redemption, with or without premium, as the resolution provides.

(b) The state treasurer may, at the direction of the authority, act as transfer agent or registrar for the exchange or transfer of registered bonds and notes or maintain records so that bonds and notes in book entry may be effected and the authority may contract with or otherwise designate a bank, trust company or other person to maintain records so that bonds and notes in book entry form may be effected. The state treasurer or other designated person may effect conversion between book entry bonds and notes and registered bonds and notes for owners of bonds or notes who request such a change. The state treasurer or other designated transfer agent or registrar shall issue a confirmation of the transaction in the form of a written advice.

(c) The books of registry held by the state treasurer or other designated register shall be confidential and the information contained therein shall not be available to the public.

§ 5269. FORM OF OBLIGATION; FAITH AND CREDIT

(a) Bonds and notes issued under this chapter are not in any way a debt or liability of the state and do not create or constitute any indebtedness, liability or obligation of the state nor are they or do they constitute a pledge of the faith and credit of the state but all such bonds and notes, unless funded or refunded by authority, are payable solely from revenues or funds pledged or available for their payment as authorized herein. Each bond and note must contain a statement to the effect that the authority is obligated to pay the principal thereof and the interest thereon only from revenues or funds of the authority and that the state is not obligated to pay the principal or interest and that neither the faith and credit nor the taxing power of the state is pledged to the payment of the principal of or the interest on the bonds or notes.

(b) The state does pledge to and agree with the holders of the bonds or notes issued under this chapter, that the state will not limit or restrict the rights hereby vested in the authority to make loans to educational institutions and execute financing agreements in connection therewith or to establish and collect such fees or other charges as may be convenient or necessary to produce sufficient revenues to meet the expenses of operation of the authority, and to fulfill the terms of any agreement made with the holders of its bonds or notes or in any way impair the rights or remedies of the holders of those bonds or notes until the bonds and notes, together with interest thereon, and interest on any unpaid installments of interest, and all costs and expenses in connection with any action or proceedings by or on behalf of the holders, are fully met, paid and discharged.

§ 5270. NEGOTIABILITY OF BONDS OR NOTES

Whether or not the notes and bonds are of such form and character as to be negotiable instruments under the terms of the Uniform Commercial Code as provided by Title 9A, the notes and bonds are hereby made negotiable instruments within the meaning of and for all the purposes of said Uniform Commercial Code, subject only to the provisions of the notes and bonds for registration or for their issuance in book entry form.

§ 5271. BONDS OR NOTES AS LEGAL INVESTMENT

Notwithstanding any other provision of law to the contrary, the state and all public officers, governmental units and agencies thereof, all banks, trust companies, savings banks and institutions, building and loan associations, savings and loan associations, investment companies, and other persons carrying on a banking business, all insurance companies, insurance associations and other persons carrying on an insurance business, and all executors, administrators, guardians, trustees and other fiduciaries, may legally invest any sinking funds, moneys or other funds belonging to them or within their control in any bonds or notes issued under this chapter, and these bonds or notes are authorized security for any and all public deposits.

§ 5272. SALE PRICE

Bonds or notes of the authority may be sold at public or private sale at such price as the authority determines.

§ 5273. ADMINISTRATIVE CONSENT OR CONDITIONS NOT REQUIRED

Bonds or notes may be issued under this chapter without obtaining the consent of any department, division, commission, board, bureau or agency of the state, and without any other proceeding or the happening of any other conditions or things than those specifically required by this chapter.

§ 5274. APPROVAL OF GOVERNOR AND TREASURER

No resolution or other action by the authority providing for the issuance of bonds may be adopted or otherwise made effective without the prior approval in writing of the governor and the state treasurer. The powers conferred by this section on the governor and the state treasurer shall be exercised with due regard for the rights of the holders of bonds of the authority at any time outstanding, and nothing in, or done pursuant to, this section shall in any way limit, restrict or alter the obligation or powers of the authority or any director, officer or representative of the authority to carry out and perform in every detail each and every covenant, agreement or contract at any time made or entered into by or on behalf of the authority with respect to its bonds or for the benefit, protection, or security of the holders thereof.

§ 5275. PAYMENT OR REFUNDING OF NOTES

The authority may from time to time issue its notes under this chapter and pay and retire or fund or refund the notes from the proceeds of bonds or of other notes, or from any other funds or moneys of the authority available for that purpose in accordance with any contract between the authority and the holders of the notes. Unless provided otherwise in any contract between the authority and the holders of notes, and unless the notes are otherwise paid, funded or refunded, the proceeds of any bonds of the authority issued among other things, to fund any outstanding notes, shall be held, used and applied by the authority to the payment and retirement of the principal of the notes and the interest due and payable thereon.

§ 5276. TERMS OF AGREEMENT WITH BOND OR NOTEHOLDER

In any resolution of the authority authorizing, or relating to the issuance of any bonds or notes, the authority, in order to secure the payment of the bonds or notes and in addition to its other powers, may covenant and contract with the holders of the bonds or notes:

(1) to pledge to any payment or purpose all or any part of its revenues to which its right then exists or may thereafter come into existence, and the moneys derived therefrom, and the proceeds of any bonds or notes;

(2) to covenant against pledging all or any part of its revenues, or against permitting or suffering any lien on those revenues or its property;

(3) to covenant as to the use and disposition of any payments of principal or interest received by the authority under financing agreements or from investments held by the authority;

(4) to covenant as to establishment of reserves or sinking funds, the making of provision for them, and the regulation and disposition thereof;

(5) to covenant with respect to or against limitations on any right to sell or otherwise dispose of any property of any kind;

(6) to covenant as to any bonds and notes to be issued and their limitations and their terms and conditions and as to the custody, application and disposition of their proceeds;

(7) to covenant as to the issuance of additional bonds or notes or as to limitations on the issuance of additional bonds or notes and on the incurring of other debts;

(8) to covenant as to the payment of the principal of or interest on the bonds or notes, as to the sources and methods of payment, as to the rank or priority of any bonds or notes with respect to any lien or security or as to the acceleration of the maturity of any bonds or notes;

(9) to provide for the replacement of lost, stolen, destroyed or mutilated bonds or notes;

(10) to covenant against extending the time for the payment of bonds or notes or interest thereon;

(11) to covenant as to the redemption of bonds or notes and privileges of exchange thereof for other bonds or notes of the authority;

(12) to covenant as to any charges to be established and charged, the amount to be raised each year or other period of time by charges or other revenues and as to the use and disposition to be made thereof;

(13) to covenant to create or authorize the creation of special funds or moneys to be held in pledge or otherwise for operating expenses, payment or redemption of bonds or notes, reserves or other purposes and as to the use and disposition of the moneys held in those funds;

(14) to establish the procedure, if any, by which the terms of any contract or covenant with or for the benefit of the holders of bonds or notes may be amended or abrogated, the amount of bonds or notes the holders of which must consent thereto, and the manner in which the consent may be given;

(15) to covenant as to the custody of any of its properties or investments, the safe-keeping thereof; the insurance to be carried thereon, and the use and disposition of insurance moneys;

(16) to covenant as to the time or manner of enforcement or restraint from enforcement of any rights of the authority arising by reason of or with respect to nonpayment of any amount due under a financing agreement;

(17) to provide for the rights and liabilities, powers and duties arising upon the breach of any covenant, condition or obligation and to prescribe the events of default and the terms and conditions upon which any or all of the bonds, notes or other obligations of the authority shall become or may be declared due and payable before maturity and the terms and conditions upon which the declaration and its consequences may be waived;

(18) to vest in a trustee or trustees within or without the state such property, rights, powers and duties in trust as the authority may determine, which may include any of the rights, powers and duties of any trustee appointed by the holders of any bonds or notes and to limit or abrogate the right of the holders of any bonds of the authority to appoint a trustee under this chapter or limiting the rights, powers and duties of the trustee;

(19) to pay the costs or expenses incident to the enforcement of the bonds or notes or of the resolution or of any covenant or agreement of the authority with the holders of its bonds or notes;

(20) to agree with any corporate trustee which may be any trust company or bank having the powers of a trust company within or without the state, as to the pledging or assigning of any revenues or funds to which the authority has any rights or interest, and may further provide for such other rights and remedies exercisable by the trustee as may be proper for the protection of the holders of any bonds or notes of the authority and not otherwise in violation of law, and which agreement may provide for the restriction of the rights of any individual holder of bonds or notes of the authority;

(21) to appoint and to provide for the duties and obligations of a paying agent or paying agents, or such other fiduciaries as the resolution may provide within or without the state;

(22) to limit the rights of the holders of any bonds or notes to enforce any pledge or covenant securing bonds or notes; and

(23) to make covenants other than and in addition to the covenants herein expressly authorized, of like or different character, and to make covenants to do or refrain from doing such things as may be necessary, or convenient and desirable, in order to better secure bonds or notes or which, in the absolute discretion of the authority, will tend to make bonds or notes more marketable, notwithstanding that the covenants or things may not be enumerated herein.

§ 5277. PURCHASE AND DISPOSITION OF OWN OBLIGATIONS

The authority may purchase bonds or notes of the authority out of any of its funds or money available therefor. The authority may hold, cancel or resell bonds or notes subject to and in accordance with agreements with holders of its bonds or notes.

§ 5278. PRESUMPTION OF VALIDITY

After issuance, all bonds or notes of the authority shall be conclusively presumed to be fully authorized and issued by all the laws of this state, and any person or governmental unit shall be stopped from questioning their authorization, sale, issuance, execution or delivery by the authority.

§ 5279. TAX EXEMPTION

All property of the authority is public property devoted to an essential public and governmental function and purpose and is exempt from all taxes and special assessments of the state or any subdivision thereof. All bonds or notes issued under this chapter are issued by a body corporate and public of this state and for an essential public and governmental purpose and those bonds and notes, and the interest thereon and the income therefrom, and all fees, charges, funds, revenues, income and other moneys pledged or available to pay or secure the payment of those bonds or notes, or interest thereon, are exempt from taxation except for transfer inheritance and estate taxes.

§ 5280. RIGHTS OF HOLDERS PARAMOUNT

In order to carry out its purpose under this chapter of making loans to educational institutions, and by receipt of its income from service charges and from payments under financing agreements, and in order to produce revenues or income to the authority sufficient at all time to meet its costs and expenses of operation under this chapter and to pay the principal of and interest on its outstanding bonds and notes when due, the authority must at all times, and to the greatest extent possible, so plan to issue its bonds and notes and so lend money to educational institutions so that the purpose is achieved without in any way jeopardizing any rights of the holders of bonds or notes of the authority or affecting other matters under this chapter.

§ 5281. DEFAULT

If the authority defaults in the payment of principal or interest on any issue of notes or bonds after they become due, whether at maturity or upon call for redemption, and the default continues for 30 days, or if the authority fails or refuses to comply with this chapter or defaults in any agreement made with the holders of any issue of notes or bonds, the holders of 25 percent in aggregate principal amount of the outstanding notes or bonds of that issue, by instrument filed in the office of the Washington County clerk and executed in the same manner as a deed to be recorded, may appoint a trustee to represent the holders of those notes or bonds for the purposes herein provided.

§ 5282. POWERS OF TRUSTEE ON DEFAULT

(a) A trustee appointed under section 5281 of this title may, and shall in his or her name, upon written request of the holders of 25 percent in principal amount of the outstanding notes or bonds:

(1) by suit, action or proceeding, enforce all rights of the noteholders or bondholders, including the right to require the authority to collect rates, charges and other fees and to collect payments under financing agreements adequate to carry out any agreement as to, or pledge of, the rates, charges and other fees and of the interest and amortization payments, and to require the authority to carry out any other agreements with the holders of the notes or bonds and to perform its duties under this chapter;

(2) bring suit upon the notes or bonds;

(3) by action or suit, require the authority to account as if it were the trustee of an express trust for the holders of the notes or bonds; and

(4) by action or suit enjoin anything which may be unlawful or in violation of the rights of the holders of the notes or bonds.

(b) The trustee shall in addition to the foregoing have all the powers necessary for the exercise of any functions specifically set forth herein or incident to the general representations of bondholders or noteholders in the enforcement and protection of their rights.

§ 5283. NO ACCELERATION ON DEFAULT

The principal of notes or bonds may not be declared to be due and payable prior to the maturity or redemption date therefor.

§ 5284. RESERVE FUND

(a) The authority shall establish and maintain a special fund called the Vermont independent school financing authority reserve fund in which there shall be deposited:

(1) all moneys appropriated by the state for the purpose of the fund;

(2) all proceeds of bonds required to be deposited therein by terms of any contract between the authority and its bondholders or any resolution of the authority with respect to the proceeds of bonds; and

(3) any other moneys or funds of the authority which it determines to deposit therein.

(b) Moneys in the reserve fund shall be held and applied solely to the payment of the interest on and principal of outstanding bonds to the authority and any bonds issued on a parity therewith and any bonds issued to refund such bonds, all as they become due and payable and for the retirement of bonds. Money may not be withdrawn if it reduces the amount in the reserve fund to an amount less than the required debt service reserve, except for payment of interest then due and payable on bonds and the principal of bonds then maturing and payable and for the retirement of bonds in accordance with the terms of any contract between the authority and its bondholders and for which payments other moneys of the authority are not then available. Required debt service reserve shall not be required by resolution of the authority to exceed maximum debt service.

§ 5285. WITHDRAWAL OR TRANSFER

Moneys in the reserve fund at any time in excess of the required debt service reserve, whether by reason of investment or otherwise, may, subject to the terms of any contract between the authority and its bondholders or any resolution of the authority, be withdrawn at any time by the authority and transferred to any other fund or account of the authority.

§ 5286. INVESTMENT

(a) Moneys at any time in the reserve fund may be invested in the same manner as permitted for investment of funds belonging to the state or held in the treasury.

(b) For purposes of valuation, investments in the reserve fund shall be valued at par if purchased at par or at amortized value, as such term is defined by resolution of the authority, if purchased at other than par.

§ 5287. RELATION TO BOND SALES

Notwithstanding any other provision of this chapter, bonds shall not be issued by the authority unless there is in the reserve fund the required debt service reserve for all bonds then issued and outstanding and the bonds to be issued, provided, however, that the authority may satisfy this requirement by depositing so much of the proceeds of the bonds to be issued, upon their issuance, as is needed to achieve the required debt service reserve. The authority may at any time issue its bonds or notes for the purpose of increasing the amount in the reserve fund to the required debt service reserve, or to meet such higher or additional reserve as may be fixed by the authority with respect to the fund.

§ 5288. ANNUAL APPROPRIATION

In order to assure the maintenance of the required debt service reserve in each reserve fund established pursuant to this chapter, there shall be appropriated annually and paid to the authority for deposit in each reserve fund, such sum as shall be certified by the chair of the authority to the governor or to the governor-elect, as is necessary to restore such fund to an amount equal to the required debt service reserve. The chair shall annually, on or before February 1, make and deliver to the governor or to the governor-elect, his or her certificate stating the sum required to restore the fund to the amount aforesaid, and the sum so certified shall be appropriated and paid to the authority during the then current state fiscal year. The principal amount of bonds and notes secured by the reserve fund which may be outstanding at any time shall not exceed $25,000,000.00, excluding the principal amount of bonds or notes which have been refunded by any bonds or notes issued under this chapter.

§ 5289. GENERAL FUND

(a) The authority shall establish and maintain a general fund in which there shall be deposited:

(1) fees received or charges made by the authority for use of its services or facilities;

(2) any moneys which the authority shall transfer thereto from the reserve fund pursuant to section 5284 of this title;

(3) moneys received by the authority as payments under any financing agreement or investment obligations of the authority, or received as proceeds of sale of bonds or notes of the authority, and required under the terms of any resolution of the authority or contract with the holders of its bonds or notes to be deposited therein;

(4) any moneys required under the term of any resolution of the authority or contract with the holders of its bonds or notes to be deposited therein; and

(5) any moneys transferred thereto from any other fund or made available for the purpose of the fund by the state or for the operating expenses of the authority, provided, however, that no such deposit or transfer shall be required if such action would impair in any way any contracts between the authority and its bondholders or noteholders.

(b) Any moneys in the general fund may, subject to any contracts between the authority and its bondholders or noteholders, be transferred to the reserve fund established pursuant to section 5284 of this title, or if not so transferred, shall be used for the payment of the principal of or interest on bonds or notes of the authority presently outstanding and any bonds or notes of the authority presently outstanding, and any bonds or notes on a parity therewith, and any bonds or notes issued to refund such bonds or notes, all when they become due and payable, whether at maturity or upon redemption, including payment of any premium upon redemption prior to maturity, and any moneys in the general fund may be used for all other purposes of the authority including payment of its operating expenses.

§ 5290. OPERATING EXPENSES

No amount may be paid out of the general fund or from any account therein, which account the authority may establish therein for the purpose of payment of its operating expenses, for operating expenses of the authority in any year in excess of the amount provided for the operating expenses of the authority by the annual budget then in effect with respect to that year or any amendment thereof in effect at the time of the payment.

§ 5291. SPECIAL ACCOUNTS

The authority may establish in the general fund accounts, subaccounts or special accounts which in its opinion are necessary, desirable or convenient for its purposes.

§ 5292. ADDITIONAL ACCOUNTS

The authority may establish additional reserves or other funds or accounts as may be, in its discretion, necessary, desirable or convenient to further the accomplishment of its purposes or to comply with the provisions of any of its agreements or resolutions.

§ 5293. APPLICATION OF FUNDS; EXCESS

Money or investments in any fund or account of the authority established or held for any bonds, notes, indebtedness or liability to be paid, funded or refunded by issuance of bonds or notes shall, unless the resolution authorizing the bonds or notes provides otherwise, be applied to the payment or retirement of the bonds, notes, indebtedness or liability, and to no other purpose. If in any fund or account there are any moneys in excess of the amount required for payment, funding or refunding, the moneys may be removed from that fund or account but only to the extent that the moneys or investments thereafter remaining in the fund or account are not less than the outstanding bonds, notes, indebtedness or liability of the authority to be paid, funded or refunded and for which that fund or account was established or held.

§ 5294. SUPERIOR COURT JURISDICTION

The superior courts have jurisdiction of any suit, action or proceeding by a trustee on behalf of noteholders or bondholders. The venue of any suit, action or proceeding shall be laid in Washington County.

§ 5295. PERSONAL LIABILITY

Neither the members of the authority nor any person executing bonds or notes issued under this chapter are liable personally on the bonds or notes.

§ 5296. EXEMPTION FROM EXECUTION AND SALE

All property of the authority is exempt from levy and sale by virtue of an execution and no execution or other judicial process may issue against it nor may any judgment against the authority be a charge or lien upon its property, but nothing herein contained shall apply to or limit the rights of the holder of any bonds or notes to pursue any remedy for the enforcement of any pledge or lien given by the authority on its revenues or other moneys.

§ 5297. PLEDGE OF REVENUES; LIEN THEREOF

Any pledge of revenues or other moneys made by the authority is binding from the time when the pledge is made. Revenues or other moneys so pledged and thereafter received by the authority shall immediately be subject to the lien of the pledge without any physical delivery thereof or further act, and the lien of any pledge is binding against all parties having claims of any kind in tort, contract or otherwise against the authority, irrespective of whether the parties have notice thereof. Neither the resolution nor any other instrument by which a pledge is created need be filed or recorded except in the records of the authority.

§ 5298. SURETY FOR DEPOSITS BY AUTHORITY

All banks, trust companies, savings associations, investment companies and other persons carrying on a banking business are hereby authorized to give to the authority a good and sufficient undertaking with such sureties as shall be approved by the authority to the effect that the bank or banking institutions as hereinbefore described shall faithfully keep and pay over to the order of or upon the warrant of the authority or its authorized agent all such funds as may be deposited with it by the authority and agreed interest thereon under or by reason of this chapter, at such times or upon such demands as may be agreed with the authority or in lieu of these sureties, deposit with the authority or its authorized agent or any trustee therefor or for the holders of any bonds, as collateral, such securities as the authority may approve. The deposits of the authority may be evidenced by an agreement in such form and upon such terms and conditions as may be agreed upon by the authority and the depository bank or banking institution.

Became Law Without Governor’s Signature