MFA 2019 State Aid Note Program – Documents Now Available!


May 23rd, 2019

The Michigan Finance Authority (MFA) 2019 state aid note program materials, including the loan application, cash flow form, instructions, and calendar, are now available on the MFA’s website at www.michigan.gov/mfa. For general powers school districts and ISDs, click on “State Aid Note Program (SAN)” located under the “Finance Programs” heading on the MFA’s homepage. The filing deadline to submit the application materials is Friday, June 28, 2019.

For public school academies, click on “Public School Academy State Aid Note (PSA SAN)” under the same heading. The PSA dead­line for filing application materials is Monday, July 15, 2019. PSAs should contact their note counsel for additional details.

As in the past, the MFA requires schools to adopt a resolution authorizing the state aid note, which must be prepared by nationally recognized note counsel. The MFA recently approved the forms of resolution for the 2019 state aid note programs. Accordingly, schools should begin preparing cash flow and application materials and contact note counsel to review the draft application materials and prepare the resolution.

General powers school districts (and ISDs) will have the option to participate in the “set-aside pool,” the “no set-aside pool,” or both. With the set-aside pool, a school district is required to make monthly payments on the note before the note matures, as set forth below:

3 set-asides – May 2020 through July 2020
or
5 set-asides – March 2020 through July 2020
or
7 set-asides – January 2020 through July 2020

Set-aside payments will be invested by the MFA on behalf of districts participating in the set-aside pool. Those investments will help offset accrued interest, reducing overall borrowing costs for participating districts.

With the no set-aside pool, however, a district will pay off the principal and interest on the note as a lump-sum payment when the note matures.

For general powers school districts and ISDs, the MFA’s borrowing parameters are unchanged from 2018 and include the following:

  • Districts must use the MFA’s cash flow form that is posted on the MFA’s website.
  • The overall borrowing limit is 55% of state aid.
  • The overall borrowing limit for the no set-aside pool is between 35% and 42% of state aid, depending on the amount borrowed in 2018.
  • In general, a district cannot exceed its 2018 no set-aside borrowing percentage.
  • A district that did not participate in the MFA’s 2018 program must amortize (i.e., participate in the set-aside pool) at least 50% of its total bor­rowing amount.
  • Minor exceptions to the borrowing parameters may be considered by the MFA on a case-by-case basis.

Regardless of whether your school plans to participate in the MFA SAN program, if your school ex­pects to issue a state aid note or tax anticipation note this summer, please contact the Thrun Law Firm attor­ney who assists you with finance matters to begin the process.