Q: What should a school district do about outstanding bond coupons when the bond has matured? (I.e., when some of the bondholders have not presented the coupons for payment?)
A: Attached is a copy of Section 20-9-441, MCA, which discusses the procedure to call bonds. OPI encourages district officials to contact the County Treasurer to ask what steps to take, if any, to notify bond holders the bonds have been called.
According to Kim Smith at Department of Commerce, Section 70-9-801 and 70-9-805, MCA, state that unpaid bond interest could be construed as abandoned property and escheated to the state. She suggested that district officials should contact the county attorney on the issue of escheating unpaid bond interest to the state.
Q: Should the school keep the Debt Service Fund open while the coupons are still outstanding?
A: Yes, the debt service fund should not be closed to the general fund until all the coupons have been paid. Section 27-2-202, MCA, (see attached) indicates the statute of limitations for bonds and coupons is 8 years.
27-2-202. Actions based on contract or other obligation. (1) The period prescribed for the commencement of an action upon any contract, obligation, or liability founded upon an instrument in writing is within 8 years.
(2) The period prescribed for the commencement of an action upon a contract, account, or promise not founded on an instrument in writing is within 5 years.
(3) The period prescribed for the commencement of an action upon an obligation or liability, other than a contract, account, or promise, not founded upon an instrument in writing is within 3 years.
Consequently, the school district may have to keep the fund open for 8 years until the statute of limitation passes and then contact the county attorney to determine if the unclaimed bond interest should be escheated to the state.
Q: Should the school district make a partial transfer of cash from the debt service fund to the general fund for cash in excess of the amount unpaid coupons?
A: Seek the advice of your County Attorney on this one. Section 20-9-443, MCA, states: “When all of the bonds and bond interest of any school district have been fully paid, all money remaining in the debt service fund for such school district and all moneys which may come into such debt service fund from the payment of the delinquent taxes shall be transferred by the county treasurer to the general fund of such school district”. Partial distribution is not allowed by this section.
OPI Contact: Kathleen Wanner at (406) 444-9852 or email firstname.lastname@example.org
3rd of February, 2010