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Don’t Forget to File Your Qualifying Statement
The importance of obtaining “qualified status” each year from the Michigan Department of Treasury (“Treasury”) cannot be overemphasized. School districts, intermediate school districts, and public school academies that obtain qualified status are able to more swiftly issue new bonds and notes and pay lower filing fees to the State of Michigan for that debt. Those that do not obtain qualified status may experience significant delays in issuing bonds and notes during calendar year 2015. Those delays may be especially problematic for cash flow borrowings such as state aid notes (“SANs”) and tax anticipation notes (“TANs”).
The Revised Municipal Finance Act requires that before a school district, ISD, or PSA issues certain types of debt (including bonds, SANs, and TANs), it either must have qualified status or apply to Treasury for prior approval if qualified status was denied. Treasury has up to 30 business days, or six calendar weeks, to evaluate a prior approval application. The 30 business day review period begins on the date that Treasury deems the application “received,” as opposed to the date the application is filed with Treasury. Because of internal procedures at Treasury, actual receipt may occur up to one week after an application is filed. Consequently, a borrower without qualified status must plan well ahead and build additional time into the schedule to accommodate the Treasury application process.
School officials should ensure that the necessary steps are taken to apply to Treasury each year for qualified status to avoid the time-consuming and more costly “prior approval” process. A Municipal Finance Qualifying Statement form must be completed and filed electronically with Treasury by December 31 each year. This filing can be accomplished through Thrun Law Firm’s website (www.thrunlaw.com/links). Select “Michigan Department of Treasury - Municipal Finance” under the “Bond and Finance Links” heading. Then select “Online Qualifying Statement” and follow the instructions for online submission.
Treasury will not grant qualified status unless a school district, ISD, or PSA first files a copy of its annual audit. A school district, ISD, or PSA that fails to file its annual audit with Treasury by December 31 will be denied qualified status the next calendar year. Consequently, school officials should ensure that the audit is filed with Treasury before filing a Qualifying Statement. If your school is relying on its auditor or another third party to file the audit, it is critical you verify proper and timely filing.
We recommend that the audit be filed electronically or via certified mail or overnight carrier so delivery may be proven if an issue arises regarding timely filing. Please be aware that the State of Michigan now will accept a single electronic filing to satisfy the audit filing obligation with both Treasury and the Department of Education (“MDE”). This procedure requires that the audit be filed electronically with MDE. Please note that MDE requires that the audit for the fiscal year ended June 30, 2014 be filed by November 15, 2014, which is an earlier date than Treasury requires. Details for audit submission are available on the “Links” page of our website.
If audits are filed in “hard copy” form, separate filings must be made with both Treasury and MDE.
Some of the questions on the Municipal Finance Qualifying Statement form (such as those related to taxes levied and delinquent taxes) can be confusing. Please complete the form carefully to avoid an erroneous denial of qualified status. At a client’s request and without charge, Thrun Law Firm’s finance attorneys will review a Qualifying Statement before it is filed.