DEPARTMENT OF TREASURY  
STATE TREASURER  
SCHOOL BOND QUALIFICATION, APPROVAL, AND LOAN RULES  
(By authority conferred on the state treasurer by section 11 of the school bond  
qualification, approval, and loan act, 2005 PA 92, MCL 388.1931, and section 33 of the  
administrative procedures act of 1969, 1969 PA 306, MCL 24.233)  
PART 1. GENERAL DEFINITIONS  
R 388.1 Definitions  
Rule 1. (1) As used in these rules:  
(a) "Act" means the school bond qualification, approval, and loan act, 2005 PA 92,  
MCL 388.1921 to 388.1939.  
(b) "Business day" means any day that does not fall on a Saturday, Sunday, or state  
legal holiday.  
(c) "Calendar day" means any day represented on the yearly calendar including  
Saturday, Sunday, and state legal holidays.  
(d) "Debt service” means principal and interest payments on qualified bond issues  
and associated fees related to those bonds.  
(e) "Department" means the Michigan department of treasury.  
(f) "Pro forma debt service projection” has the meaning associated with it in section  
5 of the act.  
(g) "Qualification" means the process of qualifying bonds or loans in accordance  
with the act.  
(h) "Refunding bond" means a bond issued to refund or refinance an existing  
qualified bond or outstanding qualified loan owed to the state under this act.  
(i) “Repayment mode” is the loan status given to a school district whose annual tax  
collections exceed, or are projected in the next succeeding year to exceed, its annual debt  
service on qualified bonds, at which point the school district must begin repaying to the  
state its outstanding qualified loan balances.  
(j) "State legal holiday" means those days designated in section 1 of 1865 PA 124,  
MCL 435.101.  
(k) "Treasurer" means the Michigan state treasurer as defined by the act.  
(l) All terms not defined in these rules have the same meaning as when used in the  
act.  
History: 2007 AACS; 2014 AACS.  
PART 2. SCHOOL BOND QUALIFICATION  
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R 388.2 Preliminary qualification; application.  
Rule 2. (1) A completed preliminary qualification application shall include a  
submission to the department that complies with section 5 of the act, MCL 388.1925,  
any other applicable law, and any other guidance published by the department  
including, but not limited to, global instructions, policies, procedures, guidelines, or  
rules. The application shall include the following:  
(a) The proposed ballot language to be submitted to the electors shall include all  
language required by the following statutes:  
(i) Section 1361 of the revised school code, 1976 PA 451, MCL 380.1361  
(ii) Section 24f of the general property tax act, 1893 PA 206, MCL 211.24f  
(iii) Section 8 of the act, MCL 388.1928.  
(iv) Any other applicable law.  
(b) A description of the project or projects to be financed including all of the  
following:  
(i) A cost analysis providing summary totals that can be matched to budget  
estimates as reported by the school district.  
(ii) For new construction, all of the following shall be included:  
(A) The estimated number of rooms.  
(B) The types of rooms expected to be constructed.  
(C) The estimated square footage of the project or  
projects.  
(D) The estimated cost per square foot.  
(iii) For remodeling and site work, all of the following shall be included:  
(A) The planned use of the space.  
(B) The type of work expected to be performed.  
(C) The estimated total cost of the work to be performed.  
(iv) For site acquisitions, the total cost of acquisition shall be included, or if such  
information is not available, the estimated total cost of acquisition.  
(v) For technology, furnishings, and equipment, school districts shall provide  
detail regarding the types of technology, furnishings, and equipment to be purchased.  
(c) A pro forma debt service projection, which shall demonstrate both of the  
following:  
(i) That the projected computed millage will be sufficient to repay principal and  
interest on all of the school district's existing and proposed new qualified bonds plus  
principal and interest on all existing and anticipated qualified loans related to those  
bonds not later than the final mandatory repayment date.  
(ii) That the school district's projected average growth in taxable value is based on  
the assumptions required by the act.  
(d) The utilization rate for each project included in the preliminary qualification  
application, which meets the following specifications:  
(i) The utilization rate shall be calculated by dividing the projected 5-year  
enrollment by the standard pupil capacity factor provided by the department.  
(ii) The 5-year enrollment projection used in this calculation shall be obtained  
from an enrollment projection service provider approved by the department.  
(e) Evidence that the cost per square foot of the project or projects will be  
reasonable in light of economic conditions applicable to the geographic area in which  
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the school district is located.  
(f) An amortization schedule in accordance with sections 5(2)(k) and 7(1)(d) of  
the act, MCL 388.1925 and 388.1927.  
(2) The department shall determine the reasonableness of cost per square foot by  
comparing the cost included in the preliminary qualification application to the cost per  
square foot parameter announced annually by the department. The cost per square foot  
parameter announced annually by the department shall be calculated from data derived  
from reputable independent sources, including but not limited to, R.S. Means or such  
similar entity that provides reliable objective information.  
History: 2007 AACS; 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
R 388.3 Qualification of bonds.  
Rule 3. (1) To obtain final qualification of bonds, a school district shall, along with  
meeting any other requirements of section 7 of the act, MCL 388.1927, submit a final  
qualification application and supporting documentation in the form prescribed by the  
department.  
(2) Supporting documentation shall include all of the following:  
(a) A cover letter from legal counsel indicating the requested approval date and  
delivery date if known at the time of submission.  
(b) The certificate of determination of election results and vote count approving  
the bonds.  
(c) An updated pro forma debt service projection.  
(d) A copy of any adopted resolution authorizing the issuance of bonds.  
(e) A copy of any resolution authorizing the sale of bonds if such a resolution is  
applicable.  
(3) Supporting documentation for refunding bond issues shall include additional  
financial schedules that document net present value savings of the refunding bond  
issue.  
(4) Notwithstanding the repayment requirements of these rules, all bonds  
qualified under the act and article IX of the state constitution of 1963 shall be  
considered qualified upon issuance of the order qualifying bonds by the state treasurer  
until final maturity.  
History: 2007 AACS; 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
R 388.4 Debt service payment dates.  
Rule 4. Principal on qualified bonds shall be payable on May 1 and/or November 1,  
as approved by the department, and interest on qualified bonds shall be payable on May 1  
and/or November 1, as approved by the department.  
History: 2007 AACS; 2014 AACS.  
R 388.5 Department guidance.  
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Rule 5. The department may issue any other guidance including, but not limited to,  
global instructions, policies, procedures, or guidelines, in accordance with the act, these  
rules and, state law, as needed, to assist school districts with completing prequalification  
and qualification applications, and otherwise with complying with the act.  
History: 2007 AACS; 2014 AACS.  
PART 3. SCHOOL LOAN REVOLVING FUND LOANS  
R 388.6 Rescinded.  
History: 2007 AACS; 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
R 388.7 Rescinded.  
History: 2007 AACS; 2014 AACS.  
R 388.8 Annual loan activity application.  
Rule 8. A completed annual loan activity application shall include submission to the  
department of all of the following:  
(a) A cover transmittal letter.  
(b) An annual loan activity application consisting of a certified resolution in the  
form prescribed by the department providing for all of the following:  
(i) Designation and authorization of a school district official to complete all required  
and necessary documents related to the school loan revolving fund.  
(ii) Approval of the estimated amount to be disbursed from or repaid to the school  
loan revolving fund.  
(iii) Certification of the amount of qualified debt millage to be levied.  
(iv) Agreement to take actions or refrain from taking actions, as necessary, to  
maintain the tax-exempt status of any bonds or notes issued by the state in accordance  
with the state constitution of 1963 or by the Michigan finance authority, or its successor,  
in accordance with the act.  
(c) An annual loan activity worksheet in a form prescribed by the department.  
(d) Copies of reconciled bank statements to support the debt fund balance reported  
on the annual loan activity worksheet.  
(e) Financial analysis confirming that the current computed millage or recalculated  
computed millage is sufficient to repay principal and interest on all qualified bonds and  
loans not later than the final mandatory repayment date, unless otherwise provided for in  
the act.  
(f) Any other documentation and information necessary to determine the amount of  
the disbursement or repayment.  
History: 2007 AACS; 2014 AACS.  
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R 388.9 Worksheet/draw request; compliance with paying agent guidelines.  
Rule 9. (1) A completed draw request shall include submission to the department of  
all of the following:  
(a) A cover transmittal letter.  
(b) A worksheet/draw request.  
(c) Copies of reconciled bank statements to support the debt fund balance reported  
on worksheet/draw request.  
(d) Any other documentation and information necessary to determine the amount of  
the disbursement.  
(2) If the state or the Michigan finance authority, or its successor, issues tax exempt  
bonds for purposes of funding qualified loans related to qualified bonds, as defined in the  
act, then school districts that receive proceeds of those tax exempt bonds shall use such  
proceeds towards the district's qualified debt service within 5 business days of receipt.  
(3) School districts participating in the school bond qualification and loan program  
must assist the department in complying with third party paying agent guidance as they  
may be called or amended. Those guidelines include, but are not limited to, the  
following:  
(a) Transferring funds to the paying agent not later than 5 business days prior to any  
payment due date.  
(b) Working with paying agents when a school district is notified by a paying agent  
that it has failed to transfer sufficient funds, which paying agents must do 4 business days  
prior to the debt service due date.  
(c) Agreeing that, 3 business days prior to the debt service due date, paying agents  
will notify the department that a school district has failed to transfer sufficient funds to it.  
(d) Allowing paying agents to work with delinquent school districts to ensure debt  
service payments are made by the due date, and to keep the department informed of the  
status of the payments.  
(e) Allowing paying agents to coordinate a loan from the state through the school  
loan revolving fund to ensure timely payment of debt service, if that school district does  
not timely transfer sufficient funds.  
History: 2007 AACS; 2014 AACS.  
R 388.10 Rescinded.  
History: 2007 AACS; 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
R 388.11 Interest rates on qualified loans.  
Rule 11. (1) All qualified loans shall bear interest as defined in section 9(8) of the act,  
MCL 388.1929.  
(2) The department shall recalculate the interest rate on all qualified loans at least  
quarterly.  
(3) Interest on all qualified loans shall be compounded annually on September 30.  
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History: 2007 AACS; 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
R 388.12 Repayment; invoices.  
Rule 12. (1) The department shall issue an invoice to the school district at least  
once a year when the information contained in a loan activity statement demonstrates  
that the revenue generated by a school district's levy of the computed millage will  
exceed the annual debt service on the bonds.  
(2) The school district shall remit the amount specified in the invoice to the  
department not later than the next succeeding May 15 after the dated date of the  
invoice.  
(3) The school district shall promptly submit to the department an explanation of  
any difference between the invoiced payment due and the payment remitted.  
History: 2007 AACS; 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
PART 4. NONCOMPLIANCE  
R 388.13 Noncompliance; remedies.  
Rule 13. (1) The following situations constitute noncompliance:  
(a) A school district that owes the state loan repayments relating to qualified  
bonds fails to levy at least the computed millage upon its taxable value for debt  
retirement purposes for qualified bonds or qualified loans under the act.  
(b) A school district fails to honor its agreement to repay a qualified loan or any  
installment of a qualified loan.  
(c) A school district fails to file or correctly file required documentation as  
defined in the act or these rules.  
(2) In addition to any other remedies provided by the act or other state law, in the  
event of noncompliance, the school district shall file or correct the required  
documentation.  
(3) Failure of a school district to comply with application due dates or failure of a  
school district to process any report, application, confirmation, or repayment as  
required under the act or in these rules may result in 1 or both of the following:  
(a) The department may issue a notification to the school board requiring a  
written response of remedy.  
(b) The department may withhold a school district's state aid funds until the  
school district complies with all requirements.  
(4) None of the following situations constitutes noncompliance:  
(a) Taxpayer delinquencies.  
(b) Failure of projected pupil or tax base growth rates to meet initial projections.  
(c) Decline in the school district tax base.  
History: 2007 AACS; 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
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PART 5. REFUNDING  
R 388.14 Rescinded.  
History: 2007 AACS; 2014 AACS.  
R 388.15 Refunding bonds.  
Rule 15. (1) Bonds issued to refund qualified bonds or outstanding qualified loans  
shall comply with the provisions of the act and the revised municipal finance act, 2001  
PA 34, MCL 141.2101 to 141.2821.  
(2) The term of the refunding bond shall be no longer than the term of the original  
bond issue being refunded.  
(3) Qualified bonds issued to refund outstanding qualified loans shall not be issued  
for a term longer than the projected repayment term of the qualified loans as of the date  
of the refunding.  
(4) The department shall consider requests to issue qualified refunding bonds to  
refund outstanding qualified loans, despite the school district’s current or prospective  
computed millage equaling a level greater than the maximum levy permitted by law, and  
despite the school district’s current inability to comply with its final mandatory  
repayment date, so long as the issuance of the qualified refunding bonds will not further  
extend the school district’s anticipated repayment date of its outstanding qualified loan  
balance, will result in a savings, will improve the district’s projected qualified loan  
repayment date, and otherwise complies with the act and these rules.  
History: 2007 AACS; 2014 AACS.  
PART 6. VARIABLE INTEREST RATE DEBT  
R 388.16 Variable interest rate, interest rate exchange, swap, hedge, or  
similar agreements.  
Rule 16. (1) School districts using variable interest rate debt or entering into  
interest rate exchanges, swaps, hedges or similar agreements shall do all of the  
following:  
(a) Maintain a minimum fund balance within any applicable Internal Revenue  
Service regulations sufficient to limit borrowing from the school loan revolving fund  
to the regularly scheduled May and November borrowings.  
(b) Provide supplemental schedules with current estimates of debt service  
payments projected for the upcoming year along with the submission of the annual  
loan activity application.  
(c) Provide written notification to the department if changes are made to the  
indenture documents. If the department does not respond in writing within 30 days  
after receipt of the notification, then the parties may proceed with the transaction.  
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(2) A school district may not borrow from the school loan revolving fund to pay a  
termination payment or similar payment related to the termination or cancellation of an  
interest rate exchange or swap, hedge, or other similar agreement entered into or  
modified after July 20, 2005, pursuant to MCL 388.1923(3)(b).  
History: 2007 AACS.  
PART 7. TIME COMPUTATION  
R 388.17 Business and calendar days.  
Rule 17. (1) Unless otherwise required by these rules, when the act, these rules, or  
any other guidance published by the department including, but not limited to, global  
instructions, policies, procedures, or guidelines refer to time periods of 7 days or less, it  
shall mean business days. Time periods greater than 7 days, shall mean calendar days.  
(2) Pursuant to MCL 211.24f(2)(b), “year” means the 12 succeeding months starting  
upon and including the first anticipated levy.  
History: 2007 AACS; 2014 AACS.  
PART 8. APPEALS  
R 388.18 Appeals.  
Rule 18. (1) A school district may appeal a decision of a designated representative  
of the department to the state treasurer or his or her program designee directly by  
submitting a written request for reconsideration by the state treasurer detailing the  
grounds, legal or otherwise, for the request within 30 calendar days of the decision.  
(2) The appeal must clearly state its nature as an appeal pursuant to this rule and  
must clearly identify which decision is being appealed and the rationale for  
reconsideration.  
(3) A school district may request an appeal conference with the department as part  
of its request for reconsideration, where it can present and discuss materials supporting its  
request. Such a conference shall be scheduled within 15 days of receipt of the request.  
(4) The state treasurer or his or her program designee shall issue a final  
determination in writing within 30 calendar days of receipt of the appeal request, or after  
an appeal conference is held, whichever is later.  
(5) Decisions of the state treasurer or his or her program designee are final.  
History: 2007 AACS; 2014 AACS.  
PART 9. ANNUAL COMPUTED MILLAGE WAIVER  
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R 388.19 Annual computed millage waiver requests.  
Rule 19. (1) The department shall consider waiver requests to levy a recalculated  
computed millage that is less than the computed millage stated on the applicant’s most  
recent order qualifying bonds, but that is not lower than the computed millage rate noted  
on the applicant’s current loan agreement in effect at the time of the request. For school  
districts that have issued refunding bonds subsequent to entering into a loan agreement,  
there may be a higher computed millage rate reflected on the most recent order qualifying  
bonds than on the loan agreement.  
(2) Subject to subrule (3) of this rule, such waivers must be requested annually prior  
to June 1 each year and may be granted if all of the following statutory conditions are  
met:  
(a) The school board of the school district has applied to the state treasurer for  
permission to levy a recalculated computed millage as described in subrule (1) of this  
rule.  
(b) The application specifies the number of mills the school district requests  
permission to levy which shall be equal to the recalculated computed millage.  
(c) The waiver will be financially beneficial to this state, the school district, or both.  
It is presumed that the recalculated computed millage, despite being lower than the  
computed millage reflected on the applicant’s most recent order qualifying bonds, but not  
lower than the computed millage rate reflected on the applicant’s current loan agreement  
in effect at the time of the request, meets this condition.  
(d) The waiver will not reduce the millage levied by the school district to pay  
principal and interest on qualified bonds and/or qualified loans under the act to less than  
7 mills.  
(e) The board of the school district, by resolution, will agree to comply with all  
conditions that the state treasurer has specified in the waiver. Any conditions are  
anticipated to be only those needed to address any unforeseeable circumstances unique to  
and presented by individual school districts. The department’s approach to those  
circumstances will be uniform to the extent possible.  
(3) Once a waiver has been approved, for each subsequent consecutive year where  
the recalculated computed millage is lower than the computed millage stated on the most  
recent order qualifying bonds for the district, the district may continue to levy the lesser  
recalculated computed millage as long as it is sufficient to repay all outstanding loans by  
the final mandatory repayment date. Board acknowledgement of the waiver continuance  
will be obtained during the annual loan application process required by the act and will  
satisfy the annual waiver request requirement.  
(4) If confirmed taxable value amounts are not available prior to board certification,  
estimated taxable values may be used in the application. Revised financial schedules with  
confirmed taxable values must be submitted prior to final department approval. Complete  
and timely applications shall be processed not later than June 10.  
(5) Waiver request forms are available on the department’s website and must be  
submitted along with current pro forma debt service projections not later than June 1 to  
the appropriate contact on the department’s website.  
History: 2014 AACS.  
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PART 10. USE OF REMAINING PROCEEDS  
R 388.20 Rescinded.  
History: 2014 AACS; 2022 MR 3, Eff. Feb. 15, 2022.  
PART 11. FINAL YEAR OF REPAYMENT  
R 388.21 Computed millage exception for qualified bonds and qualified loans in  
final year of repayment.  
Rule 21. If a school district with an outstanding qualified loan balance can  
demonstrate to the satisfaction of the department that repayment in full of the outstanding  
qualified loan balance will be achieved in the school district’s next fiscal year by levying  
a millage that is less than 7 mills, or less than the computed millage stated on the school  
district’s most recent order qualifying bonds or loan agreement, then the department shall  
not object to the school district certifying a levy for that supported lesser millage amount.  
History: 2014 AACS.  
PART 12. EXTENSION OF FINAL MANDATORY REPAYMENT DATE  
R 388.22 Permissive mandatory repayment date extensions.  
Rule 22. (1) As permitted by the act, these rules, or any other guidance published by  
the department including, but not limited to, global instructions, policies, procedures, or  
guidelines, a school district may request approval from the treasurer for a later final  
mandatory repayment date.  
(2) Requests may be granted only if the following conditions are met:  
(a) The school district agrees to levy a higher millage, at a minimum of 2 mills, and  
as approved by the treasurer, subject to any maximum millage provided by law.  
(b) The school district agrees to levy the higher millage described in subdivision (a)  
of this subrule for so long as the extended final mandatory repayment remains applicable.  
(c) The school district agrees to revert back to the original mandatory repayment  
date if and when projections support that action.  
(d) At the time of the request, the school district is at or within 15 years of its  
mandatory repayment date.  
(e) At the time of the request, the school district has not previously requested such  
an extension for the final mandatory repayment date stated in its current loan agreement.  
(f) The extension is necessary for the school district to receive preliminary or final  
qualification of a new money bond issue.  
(g) The school district will enter repayment mode upon completion of the bond  
issuance described in subdivision (f) of this subrule.  
(h) The final mandatory repayment date is not extended by more than 3 years.  
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(3) Approvals shall be documented in writing either as part of the qualification order  
for the bonds, or in another written communication with the school district.  
History: 2014 AACS.  
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;