# State Finance and Procurement (GSF)

## Title 8. Debt

### Subtitle 1. General Obligation Debt

#### Section 8-101

(a) In this subtitle the following words have the meanings indicated.

(b) "Board" means the Board of Public Works.

(c) "Capital appreciation bond" means a State bond that accrues interest payable only on the date of maturity.

(d) "Enabling act" means a law that authorizes the creation of a general obligation debt of the State and the sale of State bonds to evidence that debt.

(e) "State bond" means a general obligation bond of the State.

(f) "State debt" means the general obligation debt of the State.

#### Section 8-104

(a) In this Part II of this subtitle the following words have the meanings indicated.

(b) "Committee" means the Capital Debt Affordability Committee.

(c)

  (1) "Tax supported debt" means:

    (i) State debt; and

    (ii) other forms of debt, including State agency capital leases supported in whole or part by State tax revenues and debt of the Department of Transportation, the Maryland Stadium Authority, and other units of State government which, in the opinion of the Committee, are supported directly or indirectly by State tax revenues.

  (2) "Tax supported debt" does not include capital leases used to finance energy performance contracts entered into under Sec. 12-301 of this article, if, as determined by the Committee, energy savings that are guaranteed by the contractor:

    (i) equal or exceed the capital lease payments on an annual basis; and

    (ii) are monitored in accordance with reporting requirements adopted by the Committee.

#### Section 8-105

(a) The General Assembly finds that:

  (1) for many years, State bonds have had the highest credit rating and, therefore, have been readily marketable at favorable interest rates;

  (2) to continue to finance essential capital projects for the benefit of its citizens, the State must keep this rating; and

  (3) to keep this rating, authorizations of State debt must be based on the ability of the State to meet its total debt service requirements in light of other calls on its fiscal resources.

(b) The purpose of this Part II of this subtitle is to provide for a State debt management program through which:

  (1) a State debt affordability analysis can be made annually;

  (2) on the basis of the analysis, proposed capital projects that require new State debt can be evaluated; and

  (3) the General Assembly can receive guidance in properly setting priorities among capital projects and appropriations.

#### Section 8-106

This Part II of this subtitle shall be construed liberally to carry out its purpose.

#### Section 8-107

(a) This Part II of this subtitle applies only to tax supported debt.

(b) This Part II of this subtitle does not affect:

  (1) the authority of the Governor to submit:

    (i) amendments to the consolidated loan budget or to any accompanying bill; or

    (ii) instead of amendments, separate bills that authorize State debt; or

  (2) the authority of the General Assembly to:

    (i) continue its independent analysis of State debt affordability; or

    (ii) consider bills that authorize State debt in addition to the bills that accompany the consolidated loan budget.

#### Section 8-108

There is a Capital Debt Affordability Committee in the Executive Department.

#### Section 8-109

The Committee consists of the following 7 members:

(1) 1 individual appointed by the Governor;

(2) as ex officio members:

  (i) the Comptroller;

  (ii) the Treasurer;

  (iii) the Secretary of Budget and Management; and

  (iv) the Secretary of Transportation; and

(3) as nonvoting members:

  (i) the chair of the Capital Budget Subcommittee of the Senate Budget and Taxation Committee; and

  (ii) the chair of the Capital Budget Subcommittee of the House Appropriations Committee.

#### Section 8-110

The Treasurer is the Chairman of the Committee.

#### Section 8-111

(a) The Chairman shall call meetings of the Committee as needed to perform its duties.

(b) The Committee shall invite the Executive Director of the Department of Legislative Services to attend the meetings of the Committee.

#### Section 8-112

(a) The Committee shall review on a continuing basis the size and condition of the State tax supported debt as well as other debt of State units, including the University System of Maryland, Morgan State University, St. Mary's College of Maryland, and the Baltimore City Community College.

(b) On or before October 20 of each year, the Committee shall submit to the Governor and the General Assembly the Committee's estimate of the total amount of new State debt that prudently may be authorized for the next fiscal year.

(c) In making the estimate, the Committee shall consider:

  (1) the amount of State bonds that, during the next fiscal year:

    (i) will be outstanding; and

    (ii) will be authorized but unissued;

  (2) the capital program prepared by the Department of Budget and Management;

  (3) capital improvement and school construction needs during the next 5 fiscal years, as projected by the Interagency Commission on School Construction;

  (4) projections of debt service requirements during the next 10 fiscal years;

  (5) the criteria that recognized bond rating agencies use to judge the quality of issues of State bonds;

  (6) any other factor that is relevant to:

    (i) the ability of the State to meet its projected debt service requirements for the next 5 fiscal years; or

    (ii) the marketability of State bonds;

  (7) the effect of authorizations of new State debt on each of the factors set out in this subsection; and

  (8) the amount of issuances, debt outstanding, and debt service requirement of other classes of State tax supported debt as well as other debt of State units, including the University System of Maryland, Morgan State University, St. Mary's College of Maryland, and the Baltimore City Community College.

(d) The estimate of the Committee:

  (1) is advisory; and

  (2) does not bind the General Assembly, the Board, or the Governor.

(e)

  (1) In this subsection, "System" and "academic facilities" have the meanings stated in Sec. 19-101 of the Education Article.

  (2) In addition to its other duties under this section, the Committee shall review on a continuing basis the size and condition of any debt of the University System of Maryland, Morgan State University, St. Mary's College of Maryland, and the Baltimore City Community College.

  (3) In preparing an estimate with respect to the authorization of any new State debt, the Committee shall take into account as part of the affordability analysis any debt for academic facilities to be issued by a System.

  (4) At the same time that the Committee makes its report as required under subsection (b) of this section, the Committee shall submit to the Governor and the General Assembly the Committee's estimate of the amount of new bonds for academic facilities that prudently may be authorized in the aggregate for the next fiscal year by the University System of Maryland, Morgan State University, St. Mary's College of Maryland, and the Baltimore City Community College.

  (5) The Committee may request any needed information from a System and shall consider the information in making its estimates, including any information submitted by a System at its own initiative.

  (6) This estimate:

    (i) is advisory; and

    (ii) does not bind the General Assembly, the Board, or the Governor.

#### Section 8-113

On or before November 1 of each year, after considering the current estimate of the Committee, the Governor shall determine:

(1) the total authorizations of new State debt that the Governor considers advisable for the next fiscal year; and

(2) the preliminary allocation of new State debt for:

  (i) general construction projects;

  (ii) school construction projects; and

  (iii) other special projects.

#### Section 8-114

(a) The Department of Budget and Management annually shall prepare for the Governor a draft of the part of the consolidated loan budget that relates to general construction projects.

(b) On or before the 20th day of each regular session of the General Assembly, the Governor shall submit to the General Assembly:

  (1) the consolidated loan budget; and

  (2) if necessary, 1 or more bills that authorize new State debt to fund the consolidated loan budget.

(c) The consolidated loan budget shall:

  (1) contain a complete plan of the proposed projects that any accompanying bills would fund; and

  (2) show, by dollar amount and percent, the allocation for:

    (i) general construction projects;

    (ii) school construction projects; and

    (iii) other special projects.

(d)

  (1) Each bill that the Governor submits under this section shall comply with the requirements of Article III, Sec.Sec. 34 and 52 of the Maryland Constitution.

  (2) An authorization of State debt to fund any part of the consolidated loan budget shall be deemed to be a single work, object, or purpose under Article III, Sec. 52 of the Maryland Constitution.

#### Section 8-117

(a) The General Assembly may authorize the Board to:

  (1) borrow money for any public purpose; and

  (2) issue State bonds to evidence the debt.

(b) An enabling act shall specify the total principal amount of the debt authorized by the enabling act.

(c) An enabling act may take substantially the following form:

"A BILL ENTITLED 

AN ACT concerning 

Creation of a State Debt - (Name of Project) 

FOR the purpose of authorizing the creation of a State debt not to exceed $....., (for an enabling act that requires an equal matching fund)/ in the amount of $....., (for an enabling act that requires no matching fund or a lesser matching fund) the proceeds to be used as a grant to ..... (name of grantee) for certain development or improvement purposes; providing for disbursement of the loan proceeds, subject to the requirement that the grantee provide and expend a matching fund (if the enabling act requires a matching fund); and providing generally for the issuance and sale of bonds evidencing the loan. 

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, That: 

(1) The Board of Public Works may borrow money and incur indebtedness on behalf of the State of Maryland through a State loan to be known as the ... (name of project) Loan of ... (year) equal to the lesser of (i) $... or (ii) the amount of the matching fund provided in accordance with Section 1(5) below. (For an enabling act that requires an equal matching fund)/ in the total principal amount of $..... (for an enabling act that requires no matching fund or a lesser matching fund). This loan shall be evidenced by the issuance, sale, and delivery of State general obligation bonds authorized by a resolution of the Board of Public Works and issued, sold, and delivered in accordance with Sec.Sec. 8-117 through 8-124 and 8-131.2 of the State Finance and Procurement Article.

(2) The bonds to evidence this loan or installments of this loan may be sold as a single issue or may be consolidated and sold as part of a single issue of bonds under Sec. 8-122 of the State Finance and Procurement Article.

(3) The cash proceeds of the sale of the bonds shall be paid to the Treasurer and first shall be applied to the payment of the expenses of issuing, selling, and delivering the bonds, unless funds for this purpose are otherwise provided, and then shall be credited on the books of the Comptroller and expended, on approval by the Board of Public Works, for the following public purposes, including any applicable architects' and engineers' fees: as a grant to ..... (name of grantee) (referred to hereafter in this Act as "the grantee") (for an enabling act that requires a matching fund) for (here state the purpose or purposes to which the proceeds of the bonds are to be applied).

(4) An annual State tax is imposed on all assessable property in the State in rate and amount sufficient to pay the principal of and interest on the bonds, as and when due and until paid in full. The principal shall be discharged within 15 years after the date of issue of the bonds.

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect June 1, .... (year)".

(d)

  (1) If an enabling act requires an equal matching fund, the fifth paragraph is as follows:

  "(5)    Prior to the payment of any funds under the provisions of this Act for the purposes set forth in Section 1(3) above, the grantee shall provide and expend a matching fund. No part of the grantee's matching fund may be provided, either directly or indirectly, from funds of the State, whether appropriated or unappropriated. No part of the fund may consist of real property, in kind contributions, or funds expended prior to the effective date of this Act. In case of any dispute as to the amount of the matching fund or what money or assets may qualify as matching funds, the Board of Public Works shall determine the matter and the Board's decision is final. The grantee has until June 1, ... (2 years from the effective date of the Act), to present evidence satisfactory to the Board of Public Works that a matching fund will be provided. If satisfactory evidence is presented, the Board shall certify this fact and the amount of the matching fund to the State Treasurer, and the proceeds of the loan equal to the amount of the matching fund shall be expended for the purposes provided in this Act. Any amount of the loan in excess of the amount of the matching fund certified by the Board of Public Works shall be canceled and be of no further effect.".

  (2) If an enabling act requires a lesser matching fund, the fifth paragraph is as follows:

  "(5)    Prior to the payment of any funds under the provisions of this Act for the purposes set forth in Section 1(3) above, the grantee shall provide and expend a matching fund of $ ..., (amount of the matching fund to be provided by the grantee). No part of the grantee's matching fund may be provided, either directly or indirectly, from funds of the State, whether appropriated or unappropriated. No part of the fund may consist of real property, in kind contributions, or funds expended prior to the effective date of this Act. In case of any dispute as to the amount of the matching fund or what money or assets may qualify as matching funds, the Board of Public Works shall determine the matter and the Board's decision is final. The grantee has until June 1, ... (2 years from the effective date of the Act), to present evidence satisfactory to the Board of Public Works that a matching fund will be provided. If satisfactory evidence is presented, the Board shall certify this fact to the State Treasurer, and the proceeds of the loan shall be expended for the purposes provided in this Act.".

(e) An enabling act may also contain the following paragraph:

"The proceeds of the loan must be expended or encumbered by the Board of Public Works for the purposes provided in this Act no later than June 1, .... (7 years from the effective date of the Act). If any funds authorized by this Act remain unexpended or unencumbered after June 1, .... (7 years from the effective date of the Act), the amount of the unencumbered or unexpended authorization shall be canceled and be of no further effect. If bonds have been issued for the loan, the amount of unexpended or unencumbered bond proceeds shall be disposed of as provided in Sec. 8-129 of the State Finance and Procurement Article.".

(f) An enabling act under this section may contain:

  (1) an additional provision for all or part of the principal of and interest on the State bonds issued under the enabling act to be paid primarily from sources of funds other than a State tax on assessable property; and

  (2) any other additional provision that is appropriate to the purpose of the enabling act and the nature of State bonds.

#### Section 8-118

(a) The Board shall exercise the powers and perform the duties that the General Assembly delegates to the Board in connection with:

  (1) the creation of State debt;

  (2) the determination of interest on and other terms and conditions of the State debt;

  (3) the preparation of State bonds that evidence the State debt;

  (4) notice of a sale of State bonds; and

  (5) the sale.

(b) The Board shall exercise these powers and perform these duties in accordance with:

  (1) Article III, Sec. 34 of the Maryland Constitution;

  (2) Sec.Sec. 8-117 through 8-124 of this subtitle; and

  (3) the specific enabling act.

#### Section 8-119

(a) By 1 or more resolutions, the Board may provide for the terms, conditions, security, issuance, sale, delivery, replacement, or payment of the State bonds authorized by an enabling act.

(b) Unless the enabling act provides otherwise, the Board shall use the procedures set forth in Sec.Sec. 8-117 through 8-124 of this subtitle for the issuance and sale of the State bonds.

#### Section 8-120

By resolution, the Board may provide that the State bonds authorized by an enabling act:

(1) be in 1 or more series;

(2) bear a certain date of issue;

(3) be executed in a certain manner;

(4) be sold in a certain manner at public or private, negotiated sale;

(5) be in certain denominations, not necessarily in equal paramounts;

(6) mature in certain amounts at certain times, not necessarily in consecutive annual installments, but not later than 15 years after their respective dates of issue;

(7) bear interest at certain rates or at rates to be determined in the manner stated in the resolution; and

(8) be paid, as to principal and interest, at certain places.

#### Section 8-121

(a) By resolution, the Board may specify the form in which State bonds are to be issued, including:

  (1) a coupon form;

  (2) a capital appreciation form;

  (3) a variable interest rate form;

  (4) a form that qualifies for tax credits, interest subsidies, or other federal tax benefits;

  (5) a form that qualifies as a registered form under Sec.Sec. 54A, 103, and 149 of the Internal Revenue Code or a regulation proposed or adopted under those sections; and

  (6) any other registered form.

(b)

  (1) Whenever the Board provides for the sale of State bonds in registered form, the Board may establish procedures for the registration and transfer of the State bonds.

  (2) The Board may exercise any other power that relates to issuance of State bonds in registered form and that is not conferred on the Treasurer.

(c) Whenever the Board provides for the sale of State bonds in registered form, the Treasurer may:

  (1) appoint any agent, including an authenticating trustee, corporate trustee, paying agent, registrar, or transfer agent, or use the agent appointed under Sec. 8-135 of this subtitle;

  (2) specify the rights, duties, and compensation of the agent; and

  (3) in connection with the establishment and maintenance of a central depository system for the transfer or pledge of the State bonds, make agreements with:

    (i) custodian banks and their nominees; or

    (ii) financial intermediaries and their nominees.

(d) Whenever the Board provides for the sale of State bonds in variable interest rate form, the Treasurer may:

  (1) appoint any agent or other contracting party, including an underwriter, remarketing agent, dealer, tender agent, insurer, liquidity provider, or similar entity; and

  (2) specify the rights, duties, and compensation of and make agreements with the agent or other contracting party.

#### Section 8-122

(a) By resolution, the Board may provide for all or part of the State bonds authorized by 2 or more enabling acts to be consolidated and sold as a single issue. However, the Board may not include in a consolidated issue any State bonds authorized by an enabling act that specifically exempts the State bonds from this section.

(b) A consolidated issue under this section shall be known as the "State and local facilities loan" of the series and year in which the Board authorizes the sale of the issue.

(c) Notwithstanding any provision of an enabling act, each State bond that is sold as part of a consolidated issue under this section shall be identified by the series and year in which the Board authorizes the sale of the issue.

#### Section 8-122.1

(a) Upon sale of State bonds authorized by an enabling act, the principal amount of the loan authorized by that enabling act shall be reduced by:

  (1) the stated principal amount of the State bonds sold, if the bonds are sold at 95% or more of par; or

  (2) the cash proceeds, excluding any accrued interest, received for the State bonds, if the bonds are sold at less than 95% of par.

(b) Whenever State bonds are sold as a consolidated issue at less than 95% of par, the Board, by resolution, shall determine the manner in which the cash proceeds received for the bonds, excluding accrued interest, shall be allocated among the loans included in that issue.

#### Section 8-123

(a) Except as otherwise provided in this subtitle, the Board shall offer State bonds at a public sale.

(b)

  (1) At least 10 days before the date of a public sale, the Board shall give public notice of the sale.

  (2) The notice shall state the date, time, and place of the public sale.

  (3) The notice may be given by The Municipal Market Monitor (TM3) or a similar service or such other method as the Treasurer deems appropriate.

(c)

  (1) Except as provided in paragraph (2) of this subsection, at a public sale, the Board shall sell State bonds for cash to the responsible bidder who:

    (i) offers the lowest net interest cost to the State; or

    (ii) meets other terms or conditions of sale or issuance that the Board has set.

  (2) Whenever the Board determines that no bid is satisfactory and that it is in the best interests of the State to reject all bids, the Board may reject the bids.

(d)

  (1) By resolution, the Board may postpone the time for receipt of proposals for the bonds without republishing the form of advertisement for the bonds.

  (2)

    (i) The Treasurer shall provide notice of the new date and time of sale not less than 24 hours prior to the time proposals are to be submitted, which date may not be more than 30 days after the originally scheduled date of sale.

    (ii) The notice may be given by The Municipal Market Monitor (TM3) or a similar service or such other method as the Treasurer deems appropriate.

#### Section 8-123.1

(a) In accordance with the authority to issue capital appreciation bonds under Sec. 8-121 of this subtitle, the Board, in a resolution setting forth the terms and conditions of any State bond issue, may designate that all or a portion of the State bonds be issued as capital appreciation bonds.

(b) The Board may sell the capital appreciation bonds at a negotiated sale if the Board determines that a negotiated sale will provide greater access to investors who are residents of the State of Maryland.

#### Section 8-123.2

(a) In this section, "small denomination bonds" means bonds in denominations of $5,000 or less.

(b) In accordance with Sec. 8-121 of this subtitle, the Board, in a resolution setting forth the terms and conditions of any State bond issue, may designate that all or a portion of the State bonds be issued as small denomination bonds.

(c) Small denomination bonds may be issued in any form permitted under Sec. 8-121 of this subtitle.

(d) The Board may sell small denomination bonds at a negotiated sale if the Board determines that a negotiated sale will:

  (1) result in either a more efficient or economical sale of the bonds; or

  (2) provide greater access to investors who are residents of the State of Maryland.

#### Section 8-123.3

(a) In considering the structure of a State of Maryland capital appreciation general obligation bond issue, the Board of Public Works shall be sensitive to the need to help Maryland citizens save for the costs of college.

(b) The Maryland College Savings Bond Advisory Board, created under Sec. 20-101 of the Education Article, shall make recommendations to the Board of Public Works regarding the need for Maryland capital appreciation general obligation bonds for college savings.

#### Section 8-123.4

(a) Except as provided in subsection (c) of this section, in accordance with the authority to issue variable interest rate bonds under Sec. 8-121 of this subtitle, the Board, in a resolution setting forth the terms and conditions of a State bond issue, may designate that all or a portion of the State bonds be issued as variable interest rate bonds.

(b) The Board may sell variable interest rate bonds at a private, negotiated sale on the terms and conditions that the Board determines to be most advantageous to the State.

(c) At the time of issuance, the aggregate par value of the State's general obligation variable interest rate bonds shall comprise no more than 15% of the outstanding general obligation indebtedness of the State.

#### Section 8-124

(a) Subject to the provisions of subsection (b) of this section, it is the policy of the State that the preferred method of sale of general obligation bonds of the State by the Board is by public, competitive sale.

(b) The Board may offer the sale of general obligation bonds of the State at a private, negotiated sale, but only if the Board determines that:

  (1) extraordinary credit market conditions exist that warrant the use of the method authorized by this subsection instead of the method stated in subsection (a) of this section; and

  (2) the terms and conditions for the sale of general obligation bonds of the State, including price, interest rates, and payment dates, achieved through a private, negotiated sale are more advantageous to the State than the terms and conditions for the sale that can be achieved by a public, competitive sale.

(c) Whenever the Board receives no bids or rejects all bids for the State bonds offered at a public, competitive sale, the Board may sell some or all of the State bonds at a private, negotiated sale, on the terms and conditions, including price, interest rates, and payment dates, that the Board determines to be the most advantageous to the State.

(d) Any determination or finding made by the Board pursuant to this section shall be conclusive.

#### Section 8-125

(a) In this section, "Fund" means the State and Local Facilities Loan Fund.

(b) For bonds issued under Sec. 8-122 of this subtitle, the Comptroller shall establish:

  (1) the State and Local Facilities Loan Fund;

  (2) a premium and expense account in the Fund; and

  (3) for accounting purposes only:

    (i) a capital project account for each enabling act; and

    (ii) separate subaccounts for each project included in enabling acts authorizing multiple projects.

(c)

  (1) The Comptroller shall credit the proceeds of the sale of State bonds to the Fund.

  (2) The Comptroller shall credit to the premium and expenses account:

    (i) any part of the proceeds of a bond sale that is a premium; and

    (ii) any additional part of the proceeds necessary to pay the expenses of that bond sale.

(d)

  (1) On approval by the Board, the Comptroller may expend money from the Fund for any expenditure authorized by an enabling act, regardless of whether bonds have been sold to specifically fund that enabling act.

  (2) To ensure compliance with Sec. 8-127 of this subtitle, the Comptroller shall account for all expenditures from the Fund on a project-specific basis.

  (3) An expenditure made under this subsection may not reduce the amount of bonds authorized under an enabling act for which bonds have not been sold.

(e)

  (1) Unless payment of expenses otherwise has been provided, the expenses of each bond sale shall be paid from the proceeds of that bond sale credited to the premium and expense account.

  (2) After the expenses of each sale of State bonds have been paid, the remaining premium credited to the premium and expense account from that bond sale shall be transferred to the Annuity Bond Fund.

#### Section 8-126

(a) Whenever an appropriation from the General Fund is made in the State budget and is spent to finance any part of a project or program for which an enabling act authorizes State debt, the total State debt authorized by the enabling act is reduced by the lesser of:

  (1) the amount of the appropriation; or

  (2) the amount of the State debt for which State bonds have not been issued.

(b) Whenever any other funds are made available to finance any part of a project or program for which an enabling act authorizes State debt, the Governor, with the approval of the Board, may reduce the total State debt authorized by the enabling act by an amount not exceeding the amount of funds made available.

(c) The Comptroller shall submit for publication in 2 separate issues of the Maryland Register a notice that:

  (1) describes the project or program for which the debt authorization is to be reduced;

  (2) states the amount of the reduction;

  (3) states the source of the funds on which the reduction is based; and

  (4) states the chapter number and year of enactment of the enabling act and each amendment to the enabling act.

(d) A reduction under this section may become effective only after the second publication of notice in the Maryland Register.

#### Section 8-127

(a) Except as provided in Sec. 8-129 of this subtitle, the proceeds of a sale of State bonds may be used only in the manner and for a project or program that is specified in an enabling act authorizing the issuance of State bonds.

(b)

  (1) Except as provided in Sec. 8-129 of this subtitle, the proceeds of a sale of State bonds may be used only for a capital improvement unless:

    (i) the enabling act specifically provides otherwise; or

    (ii) in an emergency, the Board unanimously grants a temporary exception.

  (2) The Board shall determine whether the object of an expenditure is a capital improvement. The standard for this determination is whether the useful life of the object equals or exceeds the life of the State bonds.

(c) The Board shall enforce the provisions of this section.

#### Section 8-128

(a) In this section, "miscellaneous capital grant" means a grant for a capital project for an entity that is not a unit of State government funded in the annual State capital budget as part of:

  (1) the Miscellaneous Grant Programs;

  (2) the Local House of Delegates Initiatives; or

  (3) the Local Senate Initiatives.

(b) Unless otherwise provided in an enabling act, an authorization of State debt for a project or program shall terminate no later than 1 year after the abandonment, completion, or acceptance of the project or program, as determined by the Board.

(c) Except to the extent that money authorized by an enabling act for a State project or program has been encumbered by the Board, an authorization of State debt shall automatically terminate 7 years after the date of the authorization, unless:

  (1) the enabling act provides otherwise;

  (2) in an emergency, the Board unanimously grants a temporary exception for 1 year; or

  (3) the authorization is for a program that:

    (i) is administered by a unit of State government that receives funds that are distributed by the unit to the individual projects; and

    (ii) receives funds that may be reallocated by the unit between projects without requiring a budget amendment or an act of the General Assembly.

(d)

  (1) This subsection applies to a miscellaneous capital grant 3 years or more after the effective date of the enabling act that authorized the grant.

  (2) On or before July 1 each year, the Department of General Services shall submit to the Legislative Policy Committee, in accordance with Sec. 2-1257 of the State Government Article, a report that identifies each grant for which:

    (i) no part of the grant is under contract approved by the Board; and

    (ii) the Board has not encumbered money for any part of the grant.

(e) If an authorization is terminated in accordance with this section, the amount of any unissued bonds specifically intended for the terminated authorization shall be canceled and be of no further effect.

(f) If an authorization is terminated in accordance with this section and bonds have been issued specifically to fund the authorization, the amount of any unspent bond proceeds associated with the terminated authorization shall be disposed of as provided in Sec. 8-129 of this subtitle.

(g)

  (1) The Board shall enforce the provisions of this section.

  (2) A failure to comply with or give effect to the provisions of this section may not affect the validity or enforceability of State debt.

(h) The Board shall submit for publication in the Maryland Register a notice of any authorization of State debt that has been terminated or extended under this section; the notice shall include the chapter number and year of enactment of the enabling act and each amendment to the enabling act.

(i) A termination or extension under this section may become effective only after the publication of notice in the Maryland Register.

(j)

  (1) The Treasurer, in consultation with the Comptroller, shall submit a report on January 1 each year to the Governor and, in accordance with Sec. 2-1257 of the State Government Article, the General Assembly.

  (2) The report shall list all projects or programs for which authorization would be terminated in the upcoming year under the provisions in this section or Sec. 7-305 of this article.

#### Section 8-129

(a) Except as provided in subsection (c) of this section, with the approval of the Board, the Governor shall dispose of unspent bond proceeds specifically issued to fund an enabling act within 1 year after the termination of the State debt authorization under Sec. 8-128 of this subtitle.

(b) Except as provided in subsection (c) of this section, the Governor shall:

  (1) use the proceeds to reduce State debt authorizations, as provided in Sec. 8-126(b) through (d) of this subtitle;

  (2) allocate the proceeds to the Construction Contingency Fund, as provided in Sec. 3-609 of this article; or

  (3) order the proceeds to be credited to the Annuity Bond Fund, to pay the outstanding bonded indebtedness of the State.

(c) If bonds have not been issued specifically to fund an authorization:

  (1) the provisions of subsections (a) and (b) of this section do not apply to the authorization; and

  (2) the amount of any unissued bonds from a terminated authorization shall be canceled and be of no further effect.

(d) The Board shall enforce the provisions of this section.

#### Section 8-130

The Department of Budget and Management, with the approval of the Board, shall adopt regulations in accordance with Title 10, Subtitle 1 of the State Government Article to implement the provisions of Sec.Sec. 8-128 and 8-129 of this subtitle.

#### Section 8-131

(a) Subject to the limitations in this section, the Board of Public Works may issue new bonds to refund its outstanding bonds.

(b) The power to issue bonds under this section is in addition to any other power to borrow.

(c) The Board may issue bonds under this section only for:

  (1) the public purpose of realizing for the State a savings in the total cost of debt service on a direct comparison or present value basis; or

  (2) the public purpose of debt restructuring that reduces the total cost of debt service.

(d) The Board may:

  (1) provide that bonds under this section be in 1 or more series; and

  (2) vary the amount of the series.

(e) The total principal amount of the bonds issued under this section may exceed the total principal amount of the bonds that are being refunded.

(f) Bonds that are being refunded and that are subject to redemption before their stated dates of maturity may be called for redemption:

  (1) on the earliest redemption date; or

  (2) at a later date that the Board determines.

(g)

  (1) The Treasurer shall invest and apply proceeds of a sale of bonds issued under this section to ensure that the principal and redemption premium of, and interest on, the bonds that are being refunded will be paid in full when due.

  (2) The Treasurer may deposit any part of the proceeds of the sale of bonds issued under this section in a trust fund with a trust company or other banking institution, in the name of the State.

  (3) The trustee may invest and reinvest money in the trust fund in:

    (i) obligations of the United States;

    (ii) obligations guaranteed by the United States;

    (iii) certificates of deposit or time deposits secured by an obligation of the United States;

    (iv) certificates of deposit or time deposits secured by an obligation guaranteed by the United States; or

    (v) any obligation or other investment described in Sec. 6-222(b) of this article.

  (4) Interest, income, and profits on the investment may be applied in any lawful manner, including to the payment of:

    (i) the bonds that are being refunded; and

    (ii) the bonds issued under this section.

  (5) The trustee shall make money in the trust fund available, as the Board requires, for the payment of:

    (i) the principal and redemption premium of, and interest on, the bonds that are being refunded;

    (ii) the principal and redemption premium of, and interest on, the bonds issued under this section; or

    (iii) any other related costs.

  (6) The Comptroller shall account for the proceeds of a sale of bonds issued under this section as nonbudgeted funds.

(h) All or any part of the bonds issued under this section may be made payable from and secured by:

  (1) money in the Annuity Bond Fund established under Sec. 8-132 of this subtitle; or

  (2) other money or security that the State provides.

(i) Nothing in this section shall prevent issuance and sale of refunding bonds the interest on which is not excludable from gross income for federal income tax purposes.

#### Section 8-131.1

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Code" means the Internal Revenue Code of 1986 and includes regulations and rulings issued under that Code.

  (3) "Proceeds" means money received from the sale of State bonds, and includes any money deemed to be proceeds of State bonds under the Code.

(b) The Treasurer and the Comptroller shall establish and maintain funds and accounts for the administration, management, investment and accounting of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on State bonds.

(c) The Treasurer shall manage and invest proceeds, including any investment earnings on proceeds, in a manner so as to maintain the exclusion from gross income for federal income tax purposes of interest on State bonds. The Treasurer shall restrict the yields on investments of proceeds if and to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on State bonds.

(d) The Treasurer and the Comptroller shall prepare and maintain records of the receipt, deposit, investment, management, disbursement and application of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to maintain or verify the exclusion from gross income for federal income tax purposes of interest on State bonds.

(e) The Treasurer shall establish a separate rebate fund to be used to make any payments to the United States with respect to investment earnings on proceeds that may be required from time to time by the Code. There may be separate accounts within the rebate fund. Amounts deposited to the rebate fund shall be used only for the purpose of making rebate payments to the United States. The Treasurer shall make payments from the rebate fund as may be required from time to time in order to comply with the Code and to maintain the exclusion from gross income for federal income tax purposes of interest on State bonds. Any excess money held in the rebate fund with respect to an issue of State bonds after all required rebate payments for that issue have been made, as certified by the Treasurer, shall be deposited in the General Fund.

(f) The Treasurer and the Comptroller shall prepare and file from time to time with the appropriate agency of the United States any forms, information, and reports with respect to State bonds and the expenditure and investment of proceeds that may be required under the Code.

(g) For purposes of doing whatever is necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on State bonds, the Board, the Treasurer, and the Comptroller shall each:

  (1) take any other or further actions;

  (2) enter into any agreement or covenant regarding the use of proceeds, including any investment earnings on proceeds, the deposit of money to the rebate fund and the making of rebate payments; and

  (3) provide certifications of facts and estimates.

(h) This section does not prevent the Board from authorizing the issuance and sale of State bonds the interest on which is not excludable from gross income for federal income tax purposes if the Board in its authorizing resolution finds that to be in the best interests of the State.

#### Section 8-131.2

The State bonds, the transfer of State bonds, the interest payable on State bonds, and any income derived from State bonds, including profit realized in the sale or exchange of State bonds, are exempt from State and local taxes.

#### Section 8-132

(a) In this section, "Code" means the Internal Revenue Code of 1986 and includes regulations and rulings issued under that Code.

(b) There is an Annuity Bond Fund.

(c) The Comptroller shall:

  (1) credit to the Annuity Bond Fund any money appropriated in the State budget to:

    (i) meet the debt service requirements on State bonds; and

    (ii) pay the costs of fiscal agents and other contracting parties appointed by the State Treasurer under Sec.Sec. 8-121 and 8-136 of this subtitle; and

  (2) as specified in the appropriation, use the money to meet the debt service on the State bonds and pay fiscal agents and other contracting parties' costs.

(d) Any premium from the sale of State bonds transferred to the Annuity Bond Fund under Sec. 8-125 of this subtitle may be used to pay for:

  (1) debt service on State bonds;

  (2) capital projects; or

  (3) if necessary or appropriate from time to time to comply with the requirements of the Code, any other use authorized by the Code.

#### Section 8-133

(a) The source of payment for the principal of and interest on each State bond that is sold as part of a State and local facilities loan shall be as provided in the enabling act under which the State bond is issued.

(b) This section does not affect any exemption from taxation provided by law.

#### Section 8-134

(a)

  (1) Subject to the provisions of subsection (b) of this section, on or before May 1 of each year, the Board shall certify to the governing body of each county the rates of State tax on assessable property needed to meet the debt service requirements during the next taxable year on all the State bonds that the Board anticipates will be outstanding during that year.

  (2) Each governing body immediately shall collect the tax at the rates the Board certifies under this section.

(b) If, on or before May 1 of any year, the Comptroller certifies to the Board that the General Assembly has appropriated enough money to meet the debt service requirements during the next taxable year on an issue of State bonds:

  (1) the Board, by resolution, may determine that the tax otherwise required by the enabling act under which those State bonds are issued need not be imposed for that year; and

  (2) the Governor, by proclamation issued under the resolution, shall declare that the taxes otherwise required by the enabling act may not be collected during that year.

#### Section 8-135

(a) In this section, "financial institution" has the meaning stated in Sec. 6-201 of this article.

(b) The Treasurer may appoint any financial institution as a fiscal agent.

(c) During its agency, the fiscal agent shall be covered by a surety bond or an insurance policy of the type and in the amount of coverage determined by the State Treasurer under Sec. 5-108 of the State Government Article.

(d)

  (1) In accordance with the procedures that the Treasurer sets, a fiscal agent shall pay at the financial institution, from money advanced to the agent, the interest on State debt and, as the principal matures, the principal.

  (2) The fiscal agent shall keep a receipt for each payment.

(e) Each fiscal agent shall:

  (1) allow the Treasurer to inspect the agent's accounts at any time; and

  (2) provide copies of the accounts on request of:

    (i) the Senate;

    (ii) the House of Delegates;

    (iii) the Comptroller; or

    (iv) the Treasurer.

(f) At least once every 6 months, each fiscal agent shall send to the Treasurer:

  (1) an accounting of the State bonds and coupons that the agent has redeemed since the last accounting or transmittal under this subsection;

  (2)

    (i) a certificate that states the total number of those State bonds and coupons and that attests to the destruction of all of them by a method satisfactory to the Treasurer; or

    (ii) if the Treasurer requires, the State bonds and coupons that the agent has redeemed since the last accounting or transmittal under this subsection;

  (3) an accounting of the State bonds and coupons that have not been redeemed during any allowed redemption period that expired since the prior accounting provided under this subsection; and

  (4) the total unredeemed principal and interest on any State bonds and coupons for which the redemption period has expired since the prior accounting provided under this subsection.

(g)

  (1) The Treasurer shall examine, count, and record each State bond and coupon that a fiscal agent returns.

  (2) Once every 2 years, after the Legislative Auditor verifies the records of the Treasurer, the Comptroller and the Treasurer or their deputies shall destroy all State bonds and coupons that the fiscal agents returned before the close of the last fiscal year.

  (3) The State bonds and coupons shall be destroyed in the presence of the Legislative Auditor or a designee of the Auditor.

  (4) The Comptroller, Treasurer, and Legislative Auditor shall execute a certificate that states the total number of State bonds and coupons destroyed and that attests to the destruction of all of them.

(h) The Treasurer shall:

  (1) keep all certificates of destruction; and

  (2) send copies of each certificate to the presiding officers of the General Assembly.

(i) The Treasurer shall:

  (1) deposit unredeemed principal and interest into an unpresented bond and coupon account; and

  (2) dispose of unredeemed principal and interest as provided in Title 17 of the Commercial Law Article.

#### Section 8-136

If the Board has authorized the transaction and approved the form of the agreement, to improve the management of State general obligation debt or to reduce the cost of servicing such debt, and after giving due consideration to the creditworthiness of the counterparties, the Treasurer may:

(1) enter into interest rate exchange agreements or contracts providing for payments based on levels of or changes in interest rates; and

(2) appoint any agents necessary to implement and administer such agreements or contracts.

#### Section 8-138

Subject to the limitations in this Part V of this subtitle, and at the direction of the Board, the Treasurer may borrow money, on the credit of the State, in anticipation of:

(1) tax receipts, as set forth in the revenue estimates that support an enacted State budget; or

(2) proceeds of a sale of State bonds.

#### Section 8-139

The Board shall give the President of the Senate and the Speaker of the House of Delegates at least 10 days' prior notice of a loan under this Part V of this subtitle.

#### Section 8-140

The loans outstanding under this Part V of this subtitle may not exceed a total principal amount of $100,000,000.

#### Section 8-141

The Board shall determine the interest rates on loans under this Part V of this subtitle.

#### Section 8-142

(a) A loan under this Part V of this subtitle in anticipation of proceeds of a sale of State bonds shall be repaid within 180 days after the date of the loan.

(b) A loan under this Part V of this subtitle in anticipation of tax receipts shall be repaid within 180 days after the date of the loan but no later than 45 days after the close of the fiscal year.

(c) The Board may not extend a time limit set in this section.

#### Section 8-145

(a) Whenever the owner of a State bond or coupon from a State bond satisfies the Treasurer, by legal and competent evidence, that the State bond or coupon has been lost and gives the Treasurer satisfactory security to indemnify the State against any other claim on the State bond or coupon, the Treasurer may issue a duplicate State bond or duplicate coupon.

(b) Each duplicate State bond or duplicate coupon shall:

  (1) show on its face that it is a duplicate of a lost State bond or coupon; and

  (2) correspond in amount with the lost State bond or coupon.

### Subtitle 2. Debts of State Units

#### Section 8-201

(a) In this subtitle the following words have the meanings indicated, unless the context clearly requires otherwise.

(b)

  (1) "Bond" means an obligation for the payment of money, by whatever name known or source of funds secured, issued by a State unit under general or special statutory authority.

  (2) "Bond" includes:

    (i) a bond;

    (ii) a certificate of indebtedness;

    (iii) an interim certificate; and

    (iv) a note.

(c) "Enabling act" means a law that authorizes a State unit to create a debt and to sell bonds to evidence that debt.

(d) "Resolution" means a resolution or other evidence of official action customarily used by a State unit.

(e)

  (1) "State unit" means a unit or instrumentality of the State.

  (2) "State unit" does not include the State.

#### Section 8-202

This subtitle does not apply to an entity that is governed by Title 19, Subtitles 1, 2, and 9 and Subtitle 6, Part I of the Local Government Article.

#### Section 8-205

(a) A State unit authorized to issue bonds may issue bonds:

  (1) in coupon form; or

  (2) notwithstanding any other provision of law, in a form that qualifies as a registered form under Sec.Sec. 103 and 149 of the Internal Revenue Code or a regulation proposed or adopted under those sections.

(b) Whenever a State unit provides for the sale of bonds in registered form, the State unit may:

  (1) establish procedures for the registration and transfer of the bonds;

  (2) appoint any agent, including an authenticating trustee, corporate trustee, paying agent, registrar, or transfer agent;

  (3) in connection with the establishment and maintenance of a central depository system for the transfer or pledge of the bonds, make agreements with:

    (i) custodian banks and their nominees; or

    (ii) financial intermediaries and their nominees; and

  (4) exercise any other power that relates to issuance of bonds in registered form.

#### Section 8-206

(a)

  (1) This section does not apply if the total principal amount of the authorized issue is $25,000 or less.

  (2) This section does not apply to a bond that:

    (i) matures within 1 year after the date of issue and is issued:

      (1) in anticipation of tax receipts;

      (2) to meet current expenses; or

      (3) to meet an emergency;

    (ii) is sold to the United States or a unit or instrumentality of the United States;

    (iii) is issued under a plan of composition approved in a proceeding under Chapter IX of the United States Bankruptcy Act; or

    (iv) is issued under any other plan to refund or refinance in exchange, bond for bond, an outstanding maturing debt, other than:

      (1) a current or floating debt; or

      (2) a bond under item (i) of this paragraph.

  (3) This section does not apply if:

    (i) the proceeds of the sale of bonds are to be used with a grant from the United States or a unit or instrumentality of the United States to finance public works; and

    (ii) in the opinion of the Attorney General, the agreement or other writing referring to the grant conditions the grant on the prior execution, by the State unit and a prospective buyer, of a contract for the sale of the bonds when issued.

  (4) This section does not apply to bond or grant anticipation notes issued under Part III of this subtitle.

  (5) This section does not apply to bonds issued under an enabling act that specifically states that this section does not apply or that provides a different method for the sale of the bonds.

(b) A State unit shall offer bonds at a public sale.

(c)

  (1) A State unit shall give notice of a public sale of bonds at least twice in at least 1 newspaper with a general circulation in the State. The 1st publication shall appear at least 10 days before the date of sale.

  (2) The notice shall:

    (i) be in the form required in the resolution that authorizes the issuance of the bonds;

    (ii) state the date, time, and place of the public sale;

    (iii) describe the bonds by reference to the enabling act under which they are authorized;

    (iv) state the date of issue;

    (v) state the total principal amount;

    (vi) state the schedule of maturities;

    (vii) state the interest payable or the manner of determining the interest;

    (viii) state the purpose for which the proceeds will be used;

    (ix) describe the general form of the bonds, including:

      (1) whether the bonds will be in coupon or registered form; and

      (2) whether the principal or interest or both will be registrable;

    (x) state that each bid must be made in writing by sealed proposal; and

    (xi) state the amount of the good faith deposit that the State unit has determined must accompany the bid.

  (3) The notice may reserve to the State unit the right to reject any or all bids.

(d) Except as provided in subsection (e) of this section and Sec. 8-207 of this subtitle, the State unit shall sell the bonds to the highest bidder or bidders at the public sale.

(e)

  (1) If the State unit has reserved the right to reject bids and does reject all bids, the State unit, within 30 days after rejecting all the bids, may sell the bonds at a private sale for not less than the highest amount bid by an acceptable bidder at the public sale.

  (2) If the State unit has reserved the right to reject all bids and does reject all bids and fails to sell the bonds at a private sale within the 30-day period under paragraph (1) of this subsection, the State unit may sell the bonds only at another public sale after notice as required in subsection (c) of this section.

#### Section 8-207

(a) This section does not apply to bonds issued under an enabling act that specifically states that this section does not apply.

(b) Whenever a State unit simultaneously issues bonds authorized under 2 or more enabling acts, the State unit may allow submission of a bid that:

  (1) is for bonds authorized under 1 enabling act; and

  (2) is conditioned on the acceptance of 1 or more companion bids for bonds authorized under 1 or more of the other enabling acts.

(c) Whenever, as a whole, a set of bids under subsection (b) of this section yields to the State unit more than individual bids, the State unit shall accept the set even if 1 or more of the bids in the set yields less than the individual bids.

#### Section 8-208

(a)

  (1) This section does not apply to a bond that:

    (i) matures within 1 year after the date of issue and is issued:

      (1) in anticipation of tax receipts;

      (2) to meet current expenses; or

      (3) to meet an emergency;

    (ii) is sold to the United States or a unit or instrumentality of the United States;

    (iii) is issued under a plan of composition approved in a proceeding under Chapter IX of the United States Bankruptcy Act; or

    (iv) is issued under any other plan to refund or refinance in exchange, bond for bond, an outstanding maturing debt, other than:

      (1) a current or floating debt; or

      (2) a bond under item (i) of this paragraph.

  (2) This section does not apply to bond or grant anticipation notes issued under Part III of this subtitle.

  (3) This section does not apply to bonds issued under an enabling act that specifically states that this section does not apply or that provides a different method for establishing the maturity of the bonds.

(b)

  (1) A State unit shall issue bonds on a serial maturity plan.

  (2) The State unit may:

    (i) vary the amounts of the series; and

    (ii) provide for the maturity of a series in consecutive annual installments or at longer intervals.

(c)

  (1) The maturity date of the final series shall be based on the purpose for which the bonds are issued:

    (i) within the time limit that applies under the schedule in paragraph (2) of this subsection; or

    (ii) if more than 1 time limit applies, within the shortest applicable time limit.

  (2) The schedule of maturity dates is as follows:

  Limit on Maturity

  Purpose of Issue                                                  of Issue

  Paving existing highways or streets .....................            10 years

  Airports and buildings constructed or to be

  constructed on airports .......................................           15 years

  Highway construction ..........................................          20 years

  Electric light and power systems ...........................          25 years

  Gas systems ......................................................          25 years

  Grade crossing eliminations .................................          25 years

  Harbor improvements ..........................................          25 years

  School construction .............................................          25 years

  All unscheduled permanent structures of durable

  Materials ............................................................          25 years

  Bridges ...............................................................          30 years

  Land acquired for permanent improvements ............          40 years

  Sewerage installation .............................................          40 years

  Water Systems ......................................................          40 years

  All other unscheduled proprietary or public purposes          40 years

#### Section 8-209

(a) Subject to the limitations in this section, with the approval of the Board of Public Works, a State unit authorized to issue bonds may issue new bonds to refund its outstanding bonds.

(b) The power to issue bonds under this section is in addition to any other power to borrow.

(c) A State unit may issue bonds under this section only for:

  (1) the public purpose of realizing for the State unit a savings in the total cost of debt service on a direct comparison or present value basis;

  (2) the public purpose of debt restructuring that reduces the total cost of debt service; or

  (3) the public purpose of debt restructuring that the State unit determines:

    (i) is in its best interests;

    (ii) is consistent with its long term financial plan; and

    (iii) realizes a financial objective of the State unit, including improvement of the relationship of debt service to any source of payment such as taxes, assessments, or other charges.

(d) A State unit may:

  (1) provide that bonds under this section be in 1 or more series; and

  (2) vary the amount of the series.

(e)

  (1) The total principal amount of the bonds issued under this section may exceed the total principal amount of the bonds that are being refunded.

  (2) To determine whether the bonds under this section are within any limit on debt that applies to the State unit:

    (i) the amount of the bonds that are being refunded shall be subtracted from its total outstanding debt; and

    (ii) the amount of the bonds issued under this section shall be added to the difference.

(f)

  (1) Except as provided in paragraph (2) of this subsection, a State unit shall issue bonds under this section in accordance with the procedures that applied to issuance of the bonds that are being refunded.

  (2) If, at a public meeting, the State unit determines that it would be in the public interest, the State unit may sell bonds issued under this section at a private sale, without soliciting bids.

(g) Bonds that are being refunded and that are subject to redemption before their stated dates of maturity may be called for redemption:

  (1) on the earliest redemption date; or

  (2) at a later date that the State unit determines.

(h)

  (1) A State unit shall invest and apply proceeds of a sale of bonds issued under this section to ensure that the principal and redemption premium of, and interest on, the bonds that are being refunded will be paid in full when due.

  (2) The State unit may deposit any part of the proceeds of the sale of bonds issued under this section in a trust fund with a trust company or other banking institution, in the name of the State unit.

  (3) The trustee may invest and reinvest money in the trust fund in:

    (i) obligations of the United States;

    (ii) obligations guaranteed by the United States;

    (iii) certificates of deposit or time deposits secured by an obligation of the United States; or

    (iv) certificates of deposit or time deposits secured by an obligation guaranteed by the United States.

  (4) Interest, income, and profits on the investment may be:

    (i) considered to be revenue of a revenue project; and

    (ii) applied in any lawful manner, including to the payment of:

      (1) the bonds that are being refunded; and

      (2) the bonds issued under this section.

  (5) The trustee shall make money in the trust fund available, as the State unit requires, for the payment of:

    (i) the principal and redemption premium of, and interest on, the bonds that are being refunded;

    (ii) the principal and redemption premium of, and interest on, the bonds issued under this section; or

    (iii) any other related costs.

(i) All or any part of the bonds issued under this section may be made payable from and secured by:

  (1) money in the trust fund; or

  (2) other money or security that the State unit provides.

#### Section 8-210

(a) A State unit authorized to issue bonds:

  (1) subject to the limitations in this section and notwithstanding any other law, if the State unit determines that it is in the public interest, may issue and sell the bonds in denominations of less than $1,000, in any form; and

  (2) subject to any other provision of law, may set the prices for and the interest rates to be paid on the bonds.

(b)

  (1) A State unit may not have bonds outstanding under this section in excess of a total principal amount of $1,000,000.

  (2) The total debts of a State unit, including bonds under this section, may not exceed a limit set by law.

(c) A State unit may sell bonds issued under this section in any manner that the State unit considers appropriate, notwithstanding Sec.Sec. 8-206 and 8-208 of this subtitle or any other law that requires the solicitation of competitive bids or the public sale of bonds to the highest bidder or bidders or that regulates the manner in which the sale shall be advertised or the bonds sold.

(d)

  (1) A State unit that issues bonds under this section shall approve a disclosure document that includes:

    (i) a description of the security for the bonds;

    (ii) a statement of the purposes for which the proceeds of the bonds will be used;

    (iii) a description of the financial condition of the State unit;

    (iv) a statement of the prices for and the interest rates to be paid on the bonds; and

    (v) a statement of the times and places of payment of the principal of and interest on the bonds.

  (2) The State unit shall make the disclosure document available to buyers of the bonds.

#### Section 8-211

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Code" means the Internal Revenue Code of 1986 and includes regulations and rulings issued under that Code.

  (3) "Financial officer" means the Controller, the director of finance or similar official of a unit of the State government or a political instrumentality of the State that has authority to issue bonds. "Financial officer" includes, to the extent necessary, the Treasurer and the Comptroller.

  (4) "Proceeds" means money received from the sale of bonds, and includes any money deemed to be proceeds of bonds under the Code.

(b) The financial officer may establish and maintain funds and accounts for the administration, management, investment and accounting of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on the bonds.

(c) The financial officer may manage and invest proceeds, including any investment earnings on proceeds, in a manner so as to maintain the exclusion from gross income for federal income tax purposes of interest on the bonds. The financial officer may restrict the yields on investments of proceeds if and to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on the bonds.

(d) The financial officer may prepare and maintain records of the receipt, deposit, investment, management, disbursement and application of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to maintain or verify the exclusion from gross income for federal income tax purposes of interest on the bonds.

(e)

  (1) The financial officer may establish a separate rebate fund to be used to make any payments to the United States with respect to investment earnings on proceeds that may be required from time to time by the Code.

  (2) There may be separate accounts within the rebate fund.

  (3) Amounts deposited to the rebate fund shall be used only for the purpose of making rebate payments to the United States.

  (4) The financial officer may make payments from the rebate fund as may be required from time to time in order to:

    (i) comply with the Code; and

    (ii) maintain the exclusion from gross income for federal income tax purposes of interest on the bonds.

  (5) Any excess money held in the rebate fund with respect to an issue of bonds after all required rebate payments for that issue have been made, as certified by the financial officer, shall be applied in a manner consistent with the Code.

(f) The financial officer may prepare and file from time to time with the appropriate agency of the United States any forms, information, and reports with respect to the bonds and the expenditure and investment of proceeds that may be required under the Code.

(g) The financial officer and other officers of a State unit may:

  (1) take any other or further actions;

  (2) enter into any agreement or covenant regarding the use of proceeds, including any investment earnings on proceeds, the deposit of money to the rebate fund and the making of rebate payments; and

  (3) provide certifications of facts and estimates, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on the bonds.

(h) Nothing in this section shall prevent the State unit from authorizing the issuance and sale of bonds the interest on which is not excludable from gross income for federal income tax purposes.

#### Section 8-213

(a) A State unit authorized to issue bonds may issue and sell bond anticipation notes if, in the resolution that authorizes the notes, the State unit covenants to:

  (1) pay from the proceeds of the bonds in anticipation of the sale of which the notes are issued:

    (i) the principal of the notes; and

    (ii) to the extent that the interest on the notes is not paid from the proceeds of sale of the notes, the interest on the notes; and

  (2) issue the bonds as soon as there is no longer a reason for deferring their issuance.

(b) A State unit may issue and sell grant anticipation notes in anticipation of the receipt of a grant from the United States, the State, or any of their units if, in the resolution that authorizes the notes, the State unit covenants to pay from the proceeds of the grant in anticipation of the receipt of which the notes are issued:

  (1) the principal of the notes; and

  (2) the interest on the notes.

#### Section 8-214

(a) Bond and grant anticipation notes issued under this Part III of this subtitle shall be authorized by resolution of the State unit.

(b)

  (1) The resolution shall state:

    (i) the authority for the notes and, if the notes are bond anticipation notes, the authority for the bonds;

    (ii) the amount of notes authorized; and

    (iii) the terms of the notes.

  (2) The resolution shall specify that the notes:

    (i) be sold in a certain manner, at public sale or, if the State unit considers private negotiation to be in its best interest, at private sale;

    (ii) mature at certain times;

    (iii) bear interest at certain rates or at rates to be determined in the manner stated in the resolution; and

    (iv) be sold for certain prices or for prices to be determined in the manner stated in the resolution, which may be at, above, or below par.

  (3) The resolution may provide that the notes:

    (i) be in 1 or more series, as money is required; and

    (ii) be renewable at maturity with or without resale.

#### Section 8-215

(a) A State unit may not issue bond anticipation notes under this Part III of this subtitle in a total principal amount that exceeds the authorized amount of the bonds in anticipation of the sale of which the notes are issued and sold.

(b) A State unit may not issue grant anticipation notes under this Part III of this subtitle in a total amount, including interest, that exceeds the amount of the grant in anticipation of the receipt of which the notes are issued and sold.

#### Section 8-216

Grant anticipation notes may not be sold under this Part III of this subtitle until the State unit receives from the grantor a written commitment for the grant.

#### Section 8-217

(a) A bond anticipation note may not be issued under this Part III of this subtitle unless it is signed, endorsed, or guaranteed in the manner required by law for the bonds in anticipation of which the note is issued.

(b) A bond or grant anticipation note is valid and binding in accordance with its terms notwithstanding that:

  (1) an official whose signature appears on the note is no longer an official when the note is delivered; or

  (2) an official whose signature appears on the note became an official after the note was issued.

#### Section 8-218

(a)

  (1) The principal of and interest on bond anticipation notes under this Part III of this subtitle shall be payable from:

    (i) the 1st proceeds of sale of the bonds; or

    (ii) the tax or other revenue that the State unit has pledged to the payment of the bonds.

  (2) One year's interest on the notes, or on any renewal of the notes, accounting from the date of the initial issue of the notes, may be paid from the proceeds of sale of the notes.

(b)

  (1) Subject to paragraphs (2) and (3) of this subsection, the principal of and interest on grant anticipation notes under this Part III of this subtitle shall be payable from the proceeds of the grant.

  (2) The State unit may make the grant anticipation notes payable only from the proceeds of the grant and need not pledge the faith and credit or taxing power of the State unit.

  (3) If the State unit does not pledge its faith and credit or taxing power, the grant anticipation notes are not a debt or a charge against the general credit or taxing power of the State unit under any constitutional provision or statutory limitation.

#### Section 8-219

The proceeds of sale of bond anticipation notes shall be spent:

(1) 1st, for payment of the expenses of issuance of the notes; and

(2) then, subject to Sec. 8-218(a)(2) of this subtitle, only for the public purposes for which the bonds are authorized.

#### Section 8-220

(a)

  (1) Except for the provisions of this section, each State unit shall comply with the provisions, requirements, and limitations in the enabling act.

  (2) If a State unit is unable to sell bonds to pay the bond anticipation notes under this Part III of this subtitle when due because of an interest rate limitation in the enabling act, the State unit may:

    (i) issue bonds in a total principal amount sufficient to pay the principal of and not more than 1 year's interest on the notes; and

    (ii) provide for payment of interest on the bonds at a rate that is higher than the interest rate limitation in the enabling act.

  (3) This section is supplemental authority for a State unit to issue bonds free of an interest rate limitation to pay outstanding bond anticipation notes under this Part III of this subtitle.

(b) A resolution that authorizes the issuance of bonds under subsection (a)(2) of this section shall refer to:

  (1) the enabling act; and

  (2) this section.

#### Section 8-221

(a) A State unit may issue bond or grant anticipation notes under this Part III of this subtitle as notes in the nature of commercial paper.

(b) A bond or grant anticipation note issued as a note in the nature of commercial paper may be secured by:

  (1) a trust indenture with a trust company, or a bank with powers of a trust company, in or outside the State; and

  (2) a letter of credit, line of credit, or other credit arrangement from or with a lending institution.

(c)

  (1) For bond anticipation notes, the credit arrangement may be made payable out of:

    (i) the 1st proceeds of sale of the bonds; or

    (ii) the tax or other revenue that the State unit has pledged to payment of the principal of and interest on the bonds.

  (2) For grant anticipation notes, the credit arrangement may be made payable out of the proceeds of the grant.

#### Section 8-222

The following obligations are exempt from State and local taxation:

(1) a bond or grant anticipation note issued under this part;

(2) a bond issued to pay the notes issued under item (1) of this section; and

(3) the interest on the obligations.

### Subtitle 3

#### Section 8-301

(a) Except as provided in subsection (b) of this section or in other law, a contract to spend the proceeds of a general obligation loan that has been authorized by any act of the General Assembly may not be executed until the Board of Public Works approves the contract.

(b)

  (1) Approval by the Board of Public Works is not required if the act merely authorizes a county or municipal corporation to borrow money and no State funds are involved.

  (2) Approval by the Board of Public Works is not required for a contract or other authorization to spend the proceeds of a general obligation loan for public school construction projects.

#### Section 8-302

(a) In this section, "bond" means an obligation of the State or of any of its units or instrumentalities.

(b) If a bond otherwise complies with the requirements of the Commercial Law Article for investment securities, the bond shall be considered to be an investment security notwithstanding that:

  (1) the resolution or other authority under which the bond is issued subjects the bond to an indenture or agreement that is separate from the resolution or authority;

  (2) the resolution or other authority under which the bond is issued limits payment of principal and interest to:

    (i) the proceeds of limited sources of revenue; or

    (ii) a special fund established for that purpose;

  (3) any law limits payment of principal and interest to a certain amount or rate of tax that may be imposed; or

  (4) principal or interest are registrable.

(c) A bond that is considered to be an investment security under subsection (b) of this section has all the attributes of an investment security that are possessed by a bond that is:

  (1) issued on the full faith and credit of the issuer;

  (2) payable to bearer; and

  (3) secured as to the payment of principal and interest by the unlimited taxing power of the issuer.

#### Section 8-303

(a) In this section, "enabling act" has the meaning stated in Sec. 8-101 of this title.

(b)

  (1) Unless otherwise prohibited by law and subject to paragraph (2) of this subsection, an appropriation authorized by an enabling act may be used to reimburse a grant recipient for an expenditure incurred on or before the effective date of the enabling act.

  (2) An appropriation may not be used to reimburse a grant recipient for an expenditure if the expenditure is not consistent with the public purpose of the appropriation.

#### Section 8-304

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Convention facility" has the meaning stated in Sec. 10-601 of the Economic Development Article.

  (3) "Institution of higher education" has the meaning stated in Sec. 10-101 of the Education Article.

(b) This section applies to a convention facility and a facility at an institution of higher education that receives State capital funding totaling at least $2,000,000 in the operating or capital budget bills in the prior fiscal year.

(c) Subject to subsection (d) of this section, on or before October 1 each year, the entity responsible for facilities maintenance for a facility specified in subsection (b) of this section shall submit a report in accordance with Sec. 2-1257 of the State Government Article to the Senate Budget and Taxation Committee and the House Appropriations Committee on the entity's deferred maintenance plan.

(d) The report required under subsection (c) of this section shall include:

  (1) the dollar amount that the entity spends per square foot on deferred maintenance;

  (2) the total dollar value of the backlog for deferred maintenance;

  (3) the process for facility condition assessment, including the process for rating and assessing deferred maintenance projects;

  (4) the number of staff hours devoted to inspecting and analyzing the need for facility repair and maintenance; and

  (5) the entity's plan to address all deferred maintenance projects.

### Subtitle 4. Capital Leases

#### Section 8-401

The purpose of this subtitle is to codify the authority of the State Treasurer to enter into a capital lease agreement and to establish a method for financing a capital lease as defined in this subtitle.

#### Section 8-402

(a) In this subtitle the following terms have the meanings indicated.

(b) "Capital equipment" means any item of equipment that, by generally accepted accounting principles, is capitalized for purposes of accounting.

(c)

  (1) "Capital lease" means any lease, conditional sale, installment sale, or similar agreement, defined as a capital lease in accordance with generally accepted accounting principles, that is used to finance:

    (i) the acquisition or construction of improvements to real property, under Sec. 3-602 of this article; or

    (ii) the acquisition of capital equipment.

  (2) "Capital lease" includes a master lease.

#### Section 8-403

(a) The State Treasurer, with the approval of the Board of Public Works, may enter into a capital lease on behalf of one or more units of State government.

(b) Prior to submission of a capital lease to the Board of Public Works, the Treasurer shall submit to the Legislative Policy Committee the total financing request and any supporting information. The Legislative Policy Committee has 45 days within which to review and provide written comments on the financing.

#### Section 8-404

A capital lease authorized under this subtitle:

(1) shall be contingent on the availability of appropriated or other legally available funds, not including nonappropriated pension or retirement funds, that permit the timely payment of principal, interest, and other obligations, if any, imposed by the terms of the capital lease;

(2) may not be construed or deemed to be a debt of the State or a unit of State government; and

(3) may not constitute a pledge of the full faith and credit and taxing power of the State or a unit of State government.

#### Section 8-405

(a) Except for capital leases used to finance energy performance contracts excluded from tax supported debt under Sec. 8-104 of this title, the Treasurer shall, at a reasonable market rate, capitalize the payments on a capital lease authorized under this subtitle on an annual basis for each fiscal year the lease is in effect.

(b) The greater of the amount determined for a given fiscal year under subsection (a) of this section or the amount of any purchase value at the termination of a capital lease authorized under this subtitle shall be included in the tax supported debt considered by the Capital Debt Affordability Committee in its annual estimate for that fiscal year under Subtitle 1 of this title.

#### Section 8-406

(a)

  (1) The State Treasurer may deposit the proceeds of a capital lease authorized under this subtitle in an escrow account or similar arrangement.

  (2) The proceeds may be withdrawn for the purpose of making payment due under the terms of the capital lease.

  (3) A withdrawal made under the provisions of this section shall be made in accordance with the terms of the individual contract.

(b) The State Treasurer may invest any unexpended proceeds held in escrow and the investment income on the proceeds in obligations authorized for the investment of State funds under Sec. 6-222 of this article.

#### Section 8-407

(a)

  (1) In this section the following words have the meanings indicated.

  (2) "Code" means the Internal Revenue Code of 1986 and includes regulations and rulings issued under that Code.

  (3)

    (i) "Financial officer" means the secretary of the principal department that includes the appropriate unit or the head of the unit if the unit is an independent unit.

    (ii) "Financial officer" includes the Treasurer and the Comptroller.

  (4) "Proceeds" means money received from the sale of a capital lease, and includes any money deemed to be proceeds of a capital lease under the Code.

(b) The financial officer may establish and maintain funds and accounts for the administration, management, investment and accounting of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.

(c)

  (1) The financial officer may manage and invest proceeds, including any investment earnings on proceeds, in a manner so as to maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.

  (2) The financial officer may restrict the yields on investments of proceeds if and to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.

(d) The financial officer may prepare and maintain records of the receipt, deposit, investment, management, disbursement and application of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to maintain or verify the exclusion from gross income for federal income tax purposes of interest on a capital lease.

(e)

  (1) The financial officer may establish a separate rebate fund to be used to make any payments to the United States with respect to investment earnings on proceeds that may be required from time to time by the Code.

  (2) There may be separate accounts within the rebate fund.

  (3) Amounts deposited to the rebate fund shall be used only for the purpose of making rebate payments to the United States.

  (4) The financial officer may make payments from the rebate fund as may be required from time to time in order to:

    (i) comply with the Code; and

    (ii) maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.

  (5) Any excess money held in the rebate fund with respect to a capital lease after all required rebate payments for that capital lease have been made, as certified by the financial officer, shall be applied in a manner consistent with the Code.

(f) The financial officer may prepare and file from time to time with the appropriate agency of the United States any forms, information, and reports with respect to each capital lease and the expenditure and investment of proceeds that may be required under the Code.

(g) The financial officer and other officers of a State unit may:

  (1) take any other or further actions;

  (2) enter into any agreement or covenant regarding the use of proceeds, including any investment earnings on proceeds, the deposit of money to the rebate fund, and the making of rebate payments; and

  (3) provide certifications of facts and estimates, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.

(h) Nothing in this section shall prevent the Treasurer from entering into a capital lease the interest on which is not excludable from gross income for federal income tax purposes.

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Md. Code Ann., State Fin. & Proc. (as displayed at mgaleg.maryland.gov, October 16, 2026)