A BILL TO BE ENTITLED
AN ACT to authorize the State to issue five billion dollars of limited obligation bonds to be secured by revenues from the north Carolina Education Lottery for public school capital facilities.
The General Assembly of North Carolina enacts:
SECTION 1.  This act is entitled "The Public School Facilities Limited Obligation Bond Act of 2006".
SECTION 2.(a)  Authorization of bonds and notes. – The State Treasurer is hereby authorized, by and with the consent of the Council of State, to issue and sell, at one time or from time to time, limited obligation bonds of the State to be designated "State of North Carolina 2006 Public School Facility Bonds", with any additional designations as may be determined to indicate the issuance of bonds from time to time, or notes of the State as provided in this act, in an aggregate principal amount not exceeding five billion dollars ($5,000,000,000) of limited obligation bonds for the purpose of providing funds, with any other available funds, for the purposes authorized in this act.
SECTION 2.(b)  Use of bond proceeds. – The proceeds of the 2006 Public School Facility Bonds shall be used as provided in this subsection. The proceeds of the 2006 Public School Facility Bonds shall be used for the cost of capital facilities for new or renovated public school or community college facilities.  Funds shall be allocated for projects among the counties in accordance with the provisions of G.S. 115C‑546.2.
SECTION 3.  Definitions. – As used in this act, unless the context otherwise requires:
(1)	"Bonds" means bonds issued under this act.
(2)	"Capital facility" means any one or more of the following:
a.	Any one or more buildings, utilities, structures, or other facilities or property developments, including streets and landscaping, and the acquisition of equipment, machinery, and furnishings in connection with these items.
b.	Additions, extensions, enlargements, renovations, and improvements to existing buildings, utilities, structures, or other facilities or property developments, including streets and landscaping.
c.	Land or an interest in land.
d.	Other infrastructure.
(3)	"Cost" means any of the following in financing the cost of capital facilities as authorized by this Article:
a.	The cost of constructing, reconstructing, renovating, repairing, enlarging, acquiring, and improving capital facilities, including the acquisition of land, rights‑of‑way, easements, franchises, equipment, machinery, furnishings, and other interests in real or personal property acquired or used in connection with a capital facility.
b.	The cost of engineering, architectural, and other consulting services.
c.	The cost of providing personnel to ensure effective management of capital facilities.
d.	Administrative expenses and charges.
(4)	"Credit facility" means an agreement entered into by the State Treasurer on behalf of the State with a bank, savings and loan association, or other banking institution, an insurance company, reinsurance company, surety company, or other insurance institution, a corporation, investment banking firm, or other investment institution, or any financial institution or other similar provider of a credit facility, which provider may be located within or without the United States of America, such agreement providing for prompt payment of all or any part of the principal or purchase price (whether at maturity, presentment or tender for purchase, redemption, or acceleration), redemption premium, if any, and interest on any bonds or notes payable on demand or tender by the owner, in consideration of the State agreeing to repay the provider of the credit facility in accordance with the terms and provisions of such agreement.
(5)	"Notes" means notes issued under this act.
(6)	"Par formula" means any provision or formula adopted by the State to provide for the adjustment, from time to time, of the interest rate or rates borne by any bonds or notes, including:
a.	A provision providing for such adjustment so that the purchase price of such bonds or notes in the open market would be as close to par as possible,
b.	A provision providing for such adjustment based upon a percentage or percentages of a prime rate or base rate, which percentage or percentages may vary or be applied for different periods of time, or
c.	Such other provision as the State Treasurer may determine to be consistent with this act and will not materially and adversely affect the financial position of the State and the marketing of bonds or notes at a reasonable interest cost to the State.
(7)	"State" means the State of North Carolina.
SECTION 4.  Security for bonds. – (a)  Source of Repayment. – The net proceeds of the North Carolina Education Lottery reserved for educational projects under G.S. 18C‑164(c) shall be the sole source of security of the bonds or notes.  The payment of amounts payable by the State under the bonds or notes during any fiscal period shall be limited to funds appropriated for that purpose by the General Assembly in its discretion.
SECTION 4.(b)  No Deficiency Judgment or Pledge. – No deficiency judgment may be rendered against the State in any action for breach of any obligation under the bonds or notes or any related documents. The taxing power of the State is not and may not be pledged directly or indirectly to secure any moneys due under the bonds or notes or any related documents. In the event that the General Assembly does not appropriate sums sufficient to make payments required under the bonds or notes or any related documents, the net proceeds of the North Carolina Education Lottery reserved for educational projects under G.S. 18C‑164(c) shall be applied to satisfy these payment obligations in accordance with the bonds or notes. These net proceeds are appropriated for the purpose of making these payments. Any net proceeds in excess of the amount required to satisfy the obligations of the State under the bonds or notes or any related documents shall be used for the purposes specified in G.S. 18C‑164(c)
SECTION 4.(c)  Nonsubstitution Clause. – The bonds or notes shall not contain a nonsubstitution clause that restricts the right of the State to (i) continue to provide a service or conduct an activity or (ii) replace or provide a substitute for any capital facility.
SECTION 5.  Allocation of proceeds. – The proceeds of 2006 Public School Facility Bonds and notes, including premium thereon, if any, except the proceeds of bonds the issuance of which has been anticipated by bond anticipation notes or the proceeds of refunding bonds or notes, shall be placed by the State Treasurer in a special fund to be designated "2006 Public School Facility Bonds Fund", which may include such appropriate special accounts therein as may be determined by the State Treasurer and shall be disbursed as provided in this act.  Moneys in the 2006 Public School Facility Bonds Fund shall be allocated and expended as provided in this act.
Any additional moneys which may be received by means of a grant or grants from the United States of America or any agency or department thereof or from any other source for deposit to the 2006 Public School Facility Bonds Fund may be placed in the 2006 Public School Facility Bonds Fund or in a separate account or fund and shall be disbursed, to the extent permitted by the terms of the grant or grants, without regard to any limitations imposed by this act.
Moneys in the 2006 Public School Facility Bonds Fund or any separate fund or account established under this act may be invested from time to time by the State Treasurer in the same manner permitted for investment of moneys belonging to the State or held in the State treasury, except with respect to grant money to the extent otherwise directed by the terms of the grant. Investment earnings, except investment earnings with respect to grant moneys to the extent otherwise directed or restricted by the terms of the grant, may be (i) credited to the 2006 Public School Facility Bonds Fund or any separate fund or account established under this act, (ii) used to pay debt service on the bonds authorized by this act, (iii) used to satisfy compliance with applicable requirements of the federal tax law, or (iv) transferred to the General Fund of the State.
The proceeds of bonds and notes may be used with any other moneys made available by the General Assembly for purposes authorized by this act, including the proceeds of any other State bond issues, whether heretofore made available or which may be made available at the session of the General Assembly at which this act is ratified or any subsequent sessions. The proceeds of bonds and notes shall be expended and disbursed under the direction and supervision of the Director of the Budget. The funds provided by this act shall be disbursed for the purposes provided in this act upon warrants drawn on the State Treasurer by the State Controller, which warrants shall not be drawn until requisition has been approved by the Director of the Budget and which requisition shall be approved only after full compliance with the Executive Budget Act, Article 1 of Chapter 143 of the General Statutes.
SECTION 6.  Issuance of limited obligation bonds and notes. – (a)  Terms and Conditions. – Bonds or notes may bear any dates; may be serial or term bonds or notes, or any combination of these; may mature in any amounts and at any times, not exceeding 40 years from their dates; may be payable at any places, either within or without the United States, in any coin or currency of the United States that at the time of payment is legal tender for payment of public and private debts; may bear interest at any rates, which may vary from time to time; and may be made redeemable before maturity, at the option of the State or otherwise as may be provided by the State, at any prices, including a price less than or greater than the face amount of the bonds or notes, and under any terms and conditions, all as may be determined by the State Treasurer, by and with the consent of the Council of State.
SECTION 6.(b)  Signatures; Form and Denomination; Registration. – Bonds or notes may be issued in certificated or uncertificated form. If issued in certificated form, bonds or notes shall be signed on behalf of the State by the Governor or bear the Governor's facsimile signature, shall be signed by the State Treasurer or bear the State Treasurer's facsimile signature, and shall bear the Great Seal of the State or a facsimile of the Seal impressed or imprinted on them. If bonds or notes bear the facsimile signatures of the Governor and the State Treasurer, the bonds or notes shall also bear a manual signature which may be that of a bond registrar, trustee, paying agent, or designated assistant of the State Treasurer. If any officer whose signature or facsimile signature appears on bonds or notes issued under this Article ceases to be that officer before the delivery of the bonds or notes, the signature or facsimile signature shall nevertheless have the same validity for all purposes as if the officer had remained in office until delivery of the bonds or notes. Bonds or notes issued under this Article may bear the facsimile signatures of persons who, at the actual time of the execution of the bonds or notes, were the proper officers to sign any bond or note although at the date of the bond or note those persons may not have been officers.
The form and denomination of bonds or notes, including the provisions with respect to registration of the bonds or notes and any system for their registration, shall be as prescribed by the State Treasurer in conformity with this Article.
SECTION 6.(c)  Manner of Sale; Expenses. – Subject to the approval by the Council of State as to the manner in which bonds or notes will be offered for sale, whether at public or private sale, whether within or without the United States, and whether by publishing notices in certain newspapers and financial journals, mailing notices, inviting bids by correspondence, negotiating contracts of purchase, or otherwise, the State Treasurer is authorized to sell bonds or notes at one time or from time to time at any rates of interest, which may vary from time to time, and at any prices, including a price less than or greater than the face amount of the bonds or notes, as the State Treasurer may determine. All expenses incurred in the preparation, sale, and issuance of bonds or notes shall be paid by the State Treasurer from the proceeds of bonds or notes or other available moneys.
SECTION 6.(d)  Application of Proceeds. – The proceeds of any bonds or notes shall be used solely for the purposes for which the bonds or notes were issued and shall be disbursed in the manner and under the restrictions, if any, that the Council of State may provide in the resolution authorizing the issuance of, or in any trust agreement securing, the bonds or notes.
Any additional moneys that may be received by means of a grant or grants from the United States or any agency or department thereof or from any other source to aid in financing the cost of a capital facility may be disbursed, to the extent permitted by the terms of the grant or grants, without regard to any limitations imposed by this act.
SECTION 6.(e)  Notes; Repayment. – By and with the consent of the Council of State, the State Treasurer is authorized to borrow money and to execute and issue notes of the State for the same, but only in any of the following circumstances and under the following conditions:
(1)	For anticipating the sale of bonds, the issuance of which the Council of State has approved, if the State Treasurer considers it advisable to postpone the issuance of the bonds.
(2)	For the payment of interest on or any installment of principal of any bonds then outstanding, if there are not sufficient funds in the State treasury with which to pay the interest or installment of principal as they respectively become due.
(3)	For the renewal of any loan evidenced by notes authorized in this act.
(4)	For the purposes authorized in this act.
(5)	For refunding bonds or notes or financing contract indebtedness as authorized in this act.
Funds derived from the sale of limited obligation bonds or notes may be used in the payment of any bond anticipation notes issued under this act. Funds provided by the General Assembly for the payment of interest on or principal of bonds shall be used in paying the interest on or principal of any notes and any renewals thereof, the proceeds of which have been used in paying interest on or principal of the bonds.
SECTION 6.(f)  Refunding Bonds and Notes. – By and with the consent of the Council of State, the State Treasurer is authorized to issue and sell refunding bonds and notes for the purpose of refunding the bonds and notes and to pay the cost of issuance of the refunding bonds or notes. The refunding bonds and notes may be combined with any other issues of State bonds and notes issued pursuant to this act. Refunding bonds or notes may be issued at any time prior to the final maturity of the debt or obligation to be refunded. The proceeds from the sale of any refunding bonds or notes shall be applied to the immediate payment and retirement of the obligations being refunded or, if not required for the immediate payment of the obligations being refunded, the proceeds shall be deposited in trust to provide for the payment and retirement of the obligations being refunded and to pay any expenses incurred in connection with the refunding. Money in a trust fund may be invested in (i) direct obligations of the United States government, (ii) obligations the principal of and interest on which are guaranteed by the United States government, (iii) to the extent then permitted by law, obligations of any agency or instrumentality of the United States government, or (iv) certificates of deposit issued by a bank or trust company located in the State if the certificates are secured by a pledge of any of the obligations described in (i), (ii), or (iii) above having an aggregate market value, exclusive of accrued interest, equal at least to the principal amount of the certificates so secured. This section does not limit the duration of any deposit in trust for the retirement of obligations being refunded but that have not matured and are not presently redeemable or, if presently redeemable, have not been called for redemption.
SECTION 6.(g)  Security. – Payment of the principal of and the interest on bonds and notes shall be secured by the net proceeds of the North Carolina Education Lottery reserved for educational projects under G.S. 18C‑164(c).
SECTION 6.(h)  Trust Agreement. – In the discretion of the State Treasurer, any bonds and notes issued under this act may be secured by a trust agreement or similar instrument between the State and a corporate trustee or by a resolution of the Council of State providing for the appointment of a corporate trustee. The corporate trustee may be, in either case, any trust company or bank that has the powers of a trust company within or without the State. The trust may contain any provisions for protecting and enforcing the rights and remedies of the owners of any bonds or notes issued under the trust that are reasonable and not in violation of law, including covenants setting forth the duties of the State with respect to the purposes for which bond or note proceeds may be applied, the disposition and application of the revenues or assets of the State, the duties of the State with respect to the capital facilities financed, the disposition of any charges and collection of any revenues and administrative charges, the terms and conditions of the issuance of additional bonds and notes, and the custody, safeguarding, investment, and application of all moneys. All bonds and notes issued under this Article pursuant to the same trust shall be equally and ratably secured as provided in the trust, without priority by reasons of number, dates of bonds or notes, execution, or delivery, in accordance with the provisions of this act and of the trust. The trust may, however, provide that bonds or notes issued pursuant to the trust shall, to the extent and in the manner prescribed in the trust, be subordinated and junior in standing, with respect to the payment of principal and interest and to the security of the payment, to any other bonds or notes issued pursuant to the trust. It is lawful for any bank or trust company that may act as depositary of the proceeds of bonds or notes, revenues, or any other money under this act to furnish any indemnifying bonds or to pledge any securities that may be required by the State Treasurer. The trust may set out the rights and remedies of the owners of any bonds or notes and of any trustee and may restrict the individual rights of action by the owners. In addition to the foregoing, the trust may contain any other provisions the State Treasurer considers appropriate for the security of the owners of any bonds or notes. Expenses incurred in carrying out the provisions of the trust may be treated as a part of the cost of any capital facility or as an administrative charge and may be paid from the proceeds of the bonds or notes or from any other available funds.
SECTION 7.  Variable rate demand bonds and notes and financing contract indebtedness. – In fixing the details of special indebtedness, the State Treasurer may make the special indebtedness subject to any of the following conditions:
(1)	It is payable from time to time on demand or tender for purchase by the owner thereof if a credit facility supports the special indebtedness, unless the State Treasurer specifically determines that a credit facility is not required upon a determination by the State Treasurer that the absence of a credit facility will not materially and adversely affect the financial position of the State or the marketing of the bonds or notes or financing contract indebtedness at a reasonable interest cost to the State.
(2)	It is additionally supported by a credit facility.
(3)	It is subject to redemption or mandatory tender for purchase prior to maturity.
(4)	It bears interest at a rate or rates that may be fixed or may vary over any period of time, as may be provided in the proceedings providing for the issuance or incurrence of the special indebtedness, including any variations that may be permitted pursuant to a par formula.
(5)	It is the subject of a remarketing agreement under which an attempt is made to remarket special indebtedness to new purchasers before its presentment for payment to the provider of the credit facility or to the State.
If the aggregate principal amount payable by the State under a credit facility is in excess of the aggregate principal amount of the bonds or notes secured by the credit facility, whether as a result of the inclusion in the credit facility of a provision for the payment of interest for a limited period of time or the payment of a redemption premium or for any other reason, then the amount of authorized but unissued bonds or notes and financing contract indebtedness during the term of the credit facility shall not be less than the amount of the excess, unless the payment of the excess is otherwise provided for by agreement of the State executed by the State Treasurer.
SECTION 8.  Other agreements. – The State Treasurer may authorize, execute, obtain, or otherwise provide for bond insurance, investment contracts, credit and liquidity facilities, credit enhancement facilities, interest rate swap agreements and other derivative products, and any other related instruments and matters the State Treasurer determines are desirable in connection with the issuance of the bonds or notes. The State Treasurer is authorized to employ and designate any financial consultants, underwriters, fiduciaries, and bond attorneys to be associated with any incurrence or issuance of the bonds or notes under this act as the State Treasurer considers appropriate.
SECTION 9.  Tax exemption. – The bonds and notes shall at all times be free from taxation by the State or any political subdivision or any of their agencies, excepting estate, inheritance, and gift taxes; income taxes on the gain from the transfer of the indebtedness; and franchise taxes. The interest component of any payments made by the State under special indebtedness, including the interest component of any certificates of participation, is not subject to taxation as to income.
SECTION 10.  Investment eligibility. – The bonds or notes are securities or obligations in which all of the following may invest, including capital in their control or belonging to them: public officers, agencies, and public bodies of the State and its political subdivisions; insurance companies, trust companies, investment companies, banks, savings banks, savings and loan associations, credit unions, pension or retirement funds, and other financial institutions engaged in business in the State; and executors, administrators, trustees, and other fiduciaries. The bonds or notes are securities or obligations that may properly and legally be deposited with and received by any officer or agency of the State or political subdivision of the State for any purpose for which the deposit of bonds, notes, or obligations of the State or any political subdivision of the State is now or may later be authorized by law.
SECTION 11.  Interpretation of act. – (a)	Additional Method. – The foregoing sections of this act shall be deemed to provide an additional and alternative method for the doing of the things authorized thereby and shall be regarded as supplemental and additional to powers conferred by other laws, and shall not be regarded as in derogation of any powers now existing.
SECTION 11.(b)  Statutory References. – References in this act to specific sections or Chapters of the General Statutes or to specific acts are intended to be references to these sections, Chapters, or acts as they may be amended from time to time by the General Assembly.
SECTION 11.(c)  Broad Construction. – This act, being necessary for the health and welfare of the people of the State, shall be broadly construed to effect the purposes thereof.
SECTION 11.(d)  Inconsistent Provisions. – Insofar as the provisions of this act are inconsistent with the provisions of any general, special, or local laws, or parts thereof, the provisions of this act shall be controlling.
SECTION 11.(e)  Severability. – If any provision of this act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of the act which can be given effect without the invalid provision or application, and to this end the provisions of this act are declared to be severable.
SECTION 12.(a)  G.S. 18C‑164 reads as rewritten:
"§ 18C‑164.  Transfer of net revenues.
(a)	The funds remaining in the North Carolina State Lottery Fund after receipt of all revenues to the Lottery Fund and after accrual of all obligations of the Commission for prizes and expenses shall be considered to be the net revenues of the North Carolina State Lottery Fund. The net revenues of the North Carolina State Lottery Fund shall be transferred periodically to the Education Lottery Fund, which shall be created in the State treasury.
(b)	From the Education Lottery Fund, the Commission shall transfer a sum equal to five percent (5%) of the net revenue of the prior year to the Education Lottery Reserve Fund. A special revenue fund for this purpose shall be established in the State treasury to be known as the Education Lottery Reserve Fund, and that fund shall be capped at fifty million dollars ($50,000,000). Monies in the Education Lottery Reserve Fund may be appropriated only as provided in subsection (e) of this section.
(c)	The Commission shall distribute the remaining net revenue of the Education Lottery Fund to the State Treasurer to repay indebtedness secured by the proceeds of the Education Lottery. If the remaining net revenue of the Education Lottery Fund exceeds the amount needed to repay indebtedness secured by the proceeds of the Education Lottery, the Commission shall transfer the excess 
		to the Public School Building Capital Fund in accordance with G.S. 115C‑546.2.	(d)	Of the sums transferred under subsection (c) of this section, the General Assembly shall appropriate the funds annually based upon estimates of lottery net revenue to the Education Lottery Fund provided by the Office of State Budget and Management and the Fiscal Research Division of the North Carolina General Assembly.
(e)	If the actual net revenues are less than the appropriation for that given year, then the Governor may transfer from the Education Lottery Reserve Fund an amount sufficient to equal the appropriation by the General Assembly. 				
(f)	If the actual net revenues exceed the amounts appropriated in that fiscal year, the excess net revenues shall remain in the Education Lottery Fund, and then be transferred as follows:
(1)	To the State Treasurer to the extent needed to repay indebtedness secured by the proceeds of the Education Lottery.
(2)	After the distribution in subdivision (1) of this subsection to the Public School Building Capital Fund to be spent in accordance with G.S. 115C‑546.2.
	"
SECTION 12.(b)  G.S. 115C‑546.2(d) reads as rewritten:
"(d)	Monies transferred into the Fund in accordance with Chapter 18C of the General Statutes shall be allocated for capital projects for school construction projects 
	on a per average daily membership basis according to the average daily membership for the budget year as determined and certified by the State Board of Education.
					No county shall have to provide matching funds required under subsection (c) of this section.
	A county may use monies in this Fund to pay for school construction projects in local school administrative units and to retire indebtedness incurred for school construction projects incurred on or after January 1,  2000.
	A county may not use monies in this Fund to pay for school technology needs."
SECTION 13.  This act is effective when it becomes law.