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TERMS OF OBLIGATIONS; LIMITATIONS

SEC. 103. (a) (1) Obligations purchased under this title may be either general or special obligations of a local educational agency, shall be purchased at par or face value, shall be in such form and be secured in such manner and be repaid within such period, not exceeding thirty years, as may be determined by the Commissioner, and shall bear interest at a rate equal to the quarterly rate which the Secretary of the Treasury shall specify as applicable to the calendar quarter during which obligations are purchased by the Commissioner, plus one-half of 1 per centum.

(2) The quarterly rate applicable to each calendar quarter shall be determined by the Secretary of the Treasury by estimating the average yield to maturity, on the basis of daily closing market bid quotations of prices during the month preceding such calendar quarter, on all outstanding marketable obligations of the United States having a maturity date of fifteen or more years from the first day of such month, and by adjusting such estimated average yield to the nearest one-eighth of 1 per centum.

(b) Not more than 15 per centum of the sums appropriated under this title for any fiscal year shall be available for purchase of obligations of local educational agencies in any State.

(c) No obligations may be purchased under this title after June 30, 1958.

CONDITIONS TO PURCHASE OF OBLIGATIONS

SEC. 104. Obligations of a local educational agency may be purchased under this title only upon application by the State educational agency to the Commissioner certifying that

(a) such local educational agency is, as evidenced by a public offering of such obligations, unable to obtain the funds necessary to finance the cost of construction of the school facilities involved from other sources upon reasonable terms and at the interest rate applicable to obligations purchased under this title;

(b) there is an opinion by a qualified attorney that such obligations have been legally issued and are binding on such local educational agency;

(c) the school facilities to be constructed with the proceeds from the sale of the obligations are needed for current or reasonably anticipated enrollments, are consistent with any applicable State redistricting plans or policies, and will be undertaken in compliance with applicable State construction laws and standards;

and including such additional information as may be necessary to make a showing, satisfactory to the Commissioner that such local educational agency is financially able to pay such obligations as they become due.

APPROPRIATIONS

SEC. 105. (a) There are hereby authorized to be appropriated for the fiscal year beginning July 1, 1955, and the next two fiscal years, such sums, not to exceed an aggregate of $750,000,000, as may be necessary for the purchase of obligations as authorized by this title. Payments of principal and interest by local educational agencies on obligations purchased by the Commissioner under this title shall be deposited in the Treasury of the United States as miscellaneous receipts.

ADMINISTRATIVE PROVISIONS

SEC. 106. In the performance of, and with respect to, the functions, powers, and duties vested in him by this title, the Commissioner, notwithstanding the provisions of any other law, may—

(a) sell or exchange at public or private sale, upon such terms and at such prices as he may fix, any obligations purchased by him under this title; (b) subject to the specific limitations in this title and where necessary to protect the financial interest of the United states, consent to the modification, with respect to the time of payment of any installment of principal or interest, security, or any other terms of any obligation, contract, or agreement to which he is a party or which has been transferred to him pursuant to this title; and

(c) include in any contract or instrument made pursuant to this title such other convenants, conditions, or provisions as he may deem necessary to assure payment of obligations purchased under this title.

ACCOUNTING AND AUDITS

SEC. 107. The Commissioner shall, with respect to the financial operations arising by reason of this title

(a) prepare annually and submit a business-type budget as provided for wholly owned Government corporations by the Government Corporation Control Act;

(b) maintain an integral set of accounts, which shall be audited annually by the General Accounting Office in accordance with principles and procedures applicable to commercial corporate transactions, as provided by section 105 of the Government Corporation Control Act; and

(c) determine the character and necessity of expenditures under this title and the manner in which such expenditures are incurred, allowed, and paid, subject to the provisions of law specifically applicable to wholly owned Government corporations.

TITLE II-FEDERAL CREDIT ASSISTANCE TO STATE SCHOOL

BUILDING AGENCIES

PURPOSE

SEC. 201. For the purpose of assisting States desiring to do so to issue and market obligations to finance the construction of public elementary and secondary school facilities for rental to, and ultimate ownership by, local educational agencies, the Commissioner is authorized, as provided in this title, to enter into agreements, on behalf of the United States, with State school bulding agencies for making advances to reserve funds established by such agencies to help assure payment of such obligations.

AGREEMENTS WITH STATE SCHOOL BUILDING AGENCIES

SEC. 202. The Commissioner shall enter into an agreement with the State school building agency of any State only if—

(a) such agency is empowered to enter into an agreement with the Commissioner under this title and otherwise comply with the provisions of this title;

(b) the Governor of such State certifies to the Commissioner that methods for securing effective coordination between such agency and the State educational agency have been provided; and

(c) the State law empowering such agency to take the action referred to in clause (a) authorizes payment by the State, subject to and within the limits of appropriations made available for the purpose, of advances for deposit in the State account of the basic reserve fund (or funds) of such agency equal to the amount withdrawn pursuant to the agreement from such account in any year (other than the year in which occurs the latest maturity date of the obligations).

ESTABLISHMENT OF RESERVE FUNDS

SEC. 203. (a) An agreement pursuant to this title shall provide that the State school building agency shall establish and thereafter maintain a basic reserve fund and a supplemental reserve fund with respect to each issue of obligations, which funds, so long as any such obligations remain outstanding, shall be held in trust for and irrevocably pledged to the payment and retirement of such obligations.

(b) Where so provided in the agreement at the request of the State school building agency, such basic reserve fund, or such fund and such supplemental reserve fund, may be established with respect to two or more issues of obligations; and in such case such issues shall, to the extent provided in the agreement, be regarded as a single issue of obligations.

STATE ADVANCES TO BASIC RESERVE FUND

SEC. 204. Such agreement shall provide for establishment of the basic reserve fund with respect to an issue of obligations on or before the date of delivery of any such obligations to the purchasers thereof, and for deposit by the State therein, upon establishment of such fund, of an amount equal to one-half of the maximum annual debt service on such obligations. The amounts so advanced, plus any amounts subsequently advanced by the State thereto, together with any interest thereon or increments thereof accrued, shall be known as the "State account".

FEDERAL ADVANCES TO BASIC RESERVE FUND

SEC. 205 (a) In the case of any State school building agency which has entered into an agreement as provided in this title with respect to an issue of obligations, the Commissioner shall advance to such State school building agency for deposit in the basic reserve fund for such issue an amount equal to one-half of the maximum annual debt service of such obligations. Such advance shall be made on or before the date of delivery of any such obligations to the purchasers thereof. The advance so made, plus subsequent advances by the Commissioner, together with interest thereon or increments thereof accrued, shall be known as the "Federal account".

(b) If any funds are withdrawn in any year (other than the year in which occurs the latest maturity date of the obligations) from the Federal account in a basic reserve fund pursuant to an agreement under this title, the Commissioner shall make an additional advance to such account in an amount equal to that withdrawn.

(c) The faith of the United States is solemnly pledged to the payment of all advances contracted to be made to the Federal account in a basic reserve fund pursuant to this title.

(d) Advances by the Commissioner to the Federal account in a basic reservefund, together with any other sums in such account, shall be invested, as provided in the agreement

(1) in interest-bearing securities of the United States or securities guaranteed as to both principal and interest by the United States; or

(2) in bonds or other obligations which are lawful investments for fiduciary, trust, and public funds of the United States.

PAYMENT TO SUPPLEMENTAL RESERVE FUND

SEC. 206. An agreement pursuant to this title shall provide for payment into the supplemental reserve fund established with respect to an issue of obligations of all sums collected for such purpose pursuant to section 209 (d) (2).

USE OF SUPPLEMENTAL AND BASIC RESERVE FUNDS

SEC. 207. The agreement pursuant to this title shall provide that if the rentals and other funds available therefor for any year are, after payment of the other expenses specified in section 209 (d) (other than clause (1) thereof) with respect to which such rentals were collected, insufficient to meet the annual debt service for such year on any issue of obligations—

(a) the State school building agency shall use the sums, if any, in the supplemental reserve fund established for such issue for meeting such debt service;

(b) if such sums are insufficient for this purpose, such agency shall use the sums available in the basic reserve fund established for such issue; (c) withdrawals from the basic reserve fund for this purpose shall be equally divided between the State account and the Federal account in the fund, to the extent the balance in the State account is adequate for this purpose; and

(d) if such balance is not adequate, the amount of any remaining deficiency shall be withdrawn from the Federal account to the extent of any balance therein, except that the total of the withdrawals from such account with respect to such debt service may not exceed one-half of such debt service.

REPAYMENTS OF ADVANCES

SEC. 208. An agreement under this title with respect to any issue of obligations shall provide that whenever the aggregate of the sums in the basic and supplemental reserve funds, including interest or other increments from the investment thereof, exceeds two times the maximum annual debt service on such issue for any of the ensuing years, the State school-building agency shall pay to the Commissioner, first (and until all advances made by the Commissioner, subsequent to the original advance made by him, together with interest or other increment received from the investment of such advances, have been repaid), an amount which bears the same ratio to the amount of such excess as the sum of such subsequent advances bears to the sum of such advances plus the sum of any payments made by the State to the State account in the basic reserve

fund in addition to the original amount of such State account; and second (and until all advances made by the Commissioner, together with interest or other increment received from the investment of such advances, have been repaid), an amount which bears the same ratio to the amount of such excess as the sum of all advances made by the Commissioner bears to such sum plus the sum of all payments made to the State account. Amounts paid to the Commissioner under this section shall be used to redeem any outstanding obligations of the Commissioner issued pursuant to section 212 and any excess shall be deposited in the Treasury of the United States as miscellaneous receipts.

ADDITIONAL CONDITIONS OF AGREEMENT

SEC. 209. In addition to the foregoing provisions and such other covenants, conditions, or provisions as the Commissioner may deem necessary to provide reasonable assurance that advances by the Commissioner under this title will be repaid as provided in section 208, each agreement entered into by the Commissioner with respect to any one or more issues of obligations of a State schoolbuilding agency shall provide

(a) that (1) all such obligations shall mature in not more than thirtytwo years from the earliest date of any of such obligations and the first payment of principal shall become due not later than the end of the third year following such earliest date, and (2) the proceeds of the sale of such obligations shall be used to finance the cost (including interest prior to, during, and for such period not exceeding one year after completion of construction as may be provided in the agreement, and other necessary carrying charges) of construction of school facilities, for rental by local educational agencies requesting such facilities;

(b) that such school facilities shall be limited to those certified by the State educational agency to be needed for current or reasonably anticipated enrollments and to be consistent with any applicable State redistricting plans or policies, and that construction thereof will be in accord with applicable State construction laws and standards;

(c) that such school facilities, upon completion of construction, shall (1) be leased to the local educational agency for the school district in which the school facilities are located, (2) if the State so desires, be conveyed to such local educational agency upon the making of adequate provision for repayment of advances made by the Commissioner with respect to the issue of obligations and for retirement of such issue or an agreed upon portion thereof, as provided in the agreement; and

(d) that the rentals for such facilities shall be fixed, charged, and collected in amounts which will in the aggregate, together with other sums available for the purpose, provide sufficient funds to pay, to the extent payment is not otherwise provided for, (1) the annual debt service on the issue of obligations, and (2) in each year until the latest maturity date of such issue of obligations, for deposit in the supplemental reserve fund, an amount equal to one-fourth of one per centum of the original principal amount of such issue of obligations, and (3) the cost of the maintenance, repair, replacement, and insurance of such facilities, and administrative and other expenses of the State school building agency in connection with such facilities or the financing thereof.

AUTHORIZATION OF APPROPRIATIONS

SEC. 210. There are hereby authorized to be appropriated for the fiscal year beginning July 1, 1955, and the next two fiscal years, such sums as may be necessary to provide the initial Federal advances authorized by this title to be made to basic reserve funds.

LIMIT ON AMOUNT OF OBLIGATIONS

SEC. 211. The issues of obligations with respect to which Federal advances may be made pursuant to this title shall be limited to obligations issued in the period beginning July 1, 1955, and ending June 30, 1958, in an aggregate principal amount not to exceed $6,000,000,000.

OBLIGATIONS ISSUED BY SECRETARY

SEC. 212. (a) To obtain funds for additional advances under section 205 (b), the Commissioner shall issue notes, debentures, or other obligations for purchase

by the Secretary of the Treasury. The total amount of such obligations issued in any year may not exceed the aggregate amount needed for such additional advances for such year.

(b) Obligations issued by the Commissioner under this section shall be in such forms and denominations, have such maturities, and be subject to such terms and conditions as may be prescribed by the Commissioner, with the approval of the Secretary of the Treasury. Such obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the issuance of such obligations. The Secretary of the Treasury is authorized and directed to purchase any obligations of the Commissioner issued under this section and for such purpose is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued under such Act, as amended, are extended to include any purchases of the Commissioner's obligations hereunder. There are hereby authorized to be appropriated such sums as may be necessary, together with repayments made by State school building agencies hereunder, for payments on obligations issued by the Commissioner under this section.

ADMINISTRATIVE PROVISIONS

SEC. 213. (a) In the performance of, and with respect to, the functions, powers, and duties vested in the Commissioner by this title, the Commissioner, in addition to other powers conferred by this Act, shall have power to agree to modifications of agreements made under this title and to pay, compromise, waive, or release any right, title, claim, lien, or demand, however arising or acquired under this title; except that nothing in this subsection shall be construed to affect the power of the Attorney General in the conduct of litigation arising under this Act.

(b) Financial transactions of the Commissioner in making advances pursuant to this title, and vouchers approved by the Commissioner in connection with such financial transactions, shall be final and conclusive upon all officers of the Government.

SUITS AGAINST THE UNITED STATES

SEC. 214. Any State school building agency with which the Commissioner has made an agreement under this title, or any holder of obligations with respect to which a reserve fund has been established under this title, may bring suit against the United States to enforce any duty of the Commissioner under this title or any undertaking of the Commissioner under an agreement under this title. In any action arising under this title to which the United States is a party, the district courts of the United States shall have jurisdiction, without regard to the amounts involved. Such action shall be brought in the district court of the United States for the judicial district in which the plaintiff, or any of the plaintiffs if there are more than one, resides, or has his principal place of business or, if he does not have his principal place of business within any such judicial district, in the District Court of the United States for the District of Columbia.

PURCHASE OF OBLIGATIONS BY NATIONAL BANKS

SEC. 215. The last sentence of paragraph seventh of section 5136 of the Revised Statutes, as amended (12 U. S. C. 24), is amended by inserting "or State school building agency (but only in the case of obligations, of such an agency, with respect to which advances have been made pursuant to title II of the School Construction Act of 1955)" after "International Bank for Reconstruction and Development" and by striking out (in the proviso) "either of said banks” and inserting in lieu thereof "any of said banks or State school building agencies."

TAX EXEMPT STATUS OF OBLIGATIONS

SEC. 216. Obligations of any State school building agency, including interest thereon, with respect to which advances are made pursuant to this title, and income of such agency in connection with the school facilities financed by such obligations, shall be exempt from all taxes (other than estate, inheritance, and gift taxes) now or hereafter imposed by the United States.

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