School District Intercept Program
The School District Intercept Program (SDIP), C.R.S. 22-41-110, was first implemented in 1991. SDIP requires the State Treasurer to guarantee the timely payment of bonds issued by school districts. The program, as established, obliges the Treasurer to make any bond payments a school district fails to make. In the event that a bond payment is made on behalf of a district, the Treasurer will receive reimbursement over a twelve-month period from a combination of equalization and property tax revenues. The property taxes subject to this provision do not include those dedicated to bond or note repayment. Districts can choose whether to participate in the program but the school district board must adopt a resolution to this effect prior to the debt issuance. For those issues not covered by the intercept program, of course, the statutory restrictions will not apply.
Since July 1, 2003, C.R.S 22-45-103(1)(b)(V) and (VI) have required districts to place their bond repayment funds with a custodian. This ensures that no district commingles bond repayment with operating monies. The district must choose as its custodian either a commercial bank or a FDIC insured depository trust company with full trust powers. This provision does not apply to a district that chooses either to leave its bond repayment money on deposit with its County Treasurer or to not participate in the intercept program. The district may select the types of investments the custodian makes with the funds on deposit so long as those investments comply with current laws. A district can also choose to investment in certificates of deposit at a local PDPA eligible bank.
Per C.R.S. 22-45-103(1)(b)(VII) a school district is not required to select a commercial bank or depository trust company that has full trust powers to administer the school district's bond redemption fund if the school district places the funds in an escrow account with a financial institution eligible to receive public deposits, pursuant to escrow instructions which are acceptable to the State Treasurer. At a minimum, the escrow instructions shall include provisions prohibiting payment or transfer of the funds to the school district without the State Treasurer's prior written consent. Please refer to the sample escrow agreement.
A district that does not wish to use a custodial bank or depository trust but still wishes to participate in the program, may leave its bond repayment money on deposit with its County Treasurer. School districts located in more than one county and choosing to leave bond repayment money with the County Treasurer should refer to C.R.S. 22-40-104(2) for further guidance.