CHAPTER 5. REFUNDING BONDS GENERALLY
IC 5-1-5
Chapter 5. Refunding Bonds Generally
IC 5-1-5-1
Definitions
Sec. 1. The following terms as used in this chapter have thefollowing meanings:
(a) "Governing body" means the council, commission, board ofcommissioners, board of directors, board of trustees, or otherlegislative body in which the legislative powers of the issuing bodyare vested.
(b) "Issuing body" means the state of Indiana, its agencies,commissions, universities, colleges, institutions, politicalsubdivisions, counties, school corporations, hospital associations,municipal and quasi-municipal corporations, special taxing districts,and any corporation which has issued bonds payable directly orindirectly from lease rentals payable by any of the foregoing issuingbodies, now or hereafter existing under the laws of the state.
(c) "Bond" means any revenue bond, general obligation bond, oradvance refunding bond.
(d) "Revenue bond" means any bond note, warrant, certificate ofindebtedness, or other obligation, including a certificate or otherevidence of participation in the lessor's interest in and rights undera lease, for the payment of money issued by an issuing body or anypredecessor of any issuing body which is payable from designatedrevenues, rental payments, special benefits, taxes, or a special fundbut excluding any obligation constituting an indebtedness within themeaning of the constitutional debt limitation and any obligationpayable solely from special assessments or special assessments anda guaranty fund.
(e) "General obligation bond" means any bond, note, warrant,certificate of indebtedness, or other obligation of an issuing bodywhich constitutes an indebtedness within the meaning of theconstitutional debt limitation.
(f) "Advance refunding bonds" means bonds issued for thepurpose of refunding bonds first subject to redemption or maturingafter the date of the advance refunding bonds.
(g) "Ordinance" means an ordinance of a city or town orresolution or other instrument by which the governing body of theissuing body exercising any power hereunder takes formal action andadopts legislative provisions and matters of some permanency.
(h) "Corporation which has issued bonds" means a corporationorganized under IC 20-47-2 or IC 20-47-3, the laws of any state ofthe United States of America or of the United States of America,including any bank, trust company, or national association serving asa trustee under an indenture providing for issuance of bonds.
(i) "Local issuing body" means an issuing body that is:
(1) a political subdivision (as defined in IC 36-1-2-13);
(2) a district (as defined in IC 6-1.1-21.2-5); or
(3) a corporation or other entity that: (A) is not a body corporate and politic established as aninstrumentality of the state; and
(B) has issued bonds that are payable directly or indirectlyfrom lease rentals payable by a political subdivision ordistrict described in subdivision (1) or (2).
(j) "Special benefit taxes" means a special tax levied and collectedon an ad valorem basis on property for the purpose of financing localpublic improvements that:
(1) are not political or governmental in nature; and
(2) are of special benefit to the residents and property of thearea.
(k) "Tax increment revenues" means an allocation of:
(1) ad valorem property taxes;
(2) state or local adjusted gross income taxes; or
(3) state or local gross retail and use taxes;
to a redevelopment district that is based on an increase in theassessed value, wages, sales, or other economic activity occurring ina designated area. The term includes allocations described inIC 5-28-26-9, IC 6-1.1-21.2-10, IC 36-7-26-10, IC 36-7-27-8,IC 36-7-31-6, and IC 36-7-31.3-4.
(l) "Redevelopment district" refers to the following:
(1) An airport development zone under IC 8-22-3.5.
(2) A redevelopment district established under:
(A) IC 36-7-14; or
(B) IC 36-7-15.1.
(3) A special taxing district described in:
(A) IC 36-7-14.5-12.5(d); or
(B) IC 36-7-30-3(b).
(4) Another public entity to which tax increment revenues areallocated.
(m) Words used in this chapter importing singular or pluralnumber may be construed so that one (1) number includes both.
(Formerly: Acts 1973, P.L.28, SEC.1; Acts 1975, P.L.36, SEC.1.) Asamended by P.L.2-2006, SEC.8; P.L.146-2008, SEC.23.
IC 5-1-5-2
Issuance of bonds to refund outstanding bonds
Sec. 2. (a) The governing body of any issuing body may byordinance provide for the issuance of bonds to refund outstandingbonds issued at any time by such issuing body or its predecessor, andto pay redemption premiums and costs of refunding to effect a savingto the issuing body. Issuance of bonds to refund outstanding bondsmay also be made in order to pay or discharge all or any part of suchoutstanding series or issue of bond, including any interest thereon, inarrears or about to become due and for which sufficient funds are notavailable or to modify restrictive covenants in outstanding bondsimpeding additional financing. To determine whether or not asavings will be effected, consideration shall be given to the estimatedor known interest payable to the fixed maturities of the refundingbonds, the interest payable on the bonds to be refunded, the costs of
issuance of the refunding bonds, including any sale discount, theredemption premiums, if any, to be paid, and the probable earnedincome from the investment of the refunding bond proceeds pendingredemption of the bonds to be refunded.
(b) The provisions of subsection (a) requiring a savings to beeffected do not apply to the issuance of bonds to refund previouslyissued refunding bonds, if the statute under which the refundingbonds are issued expressly exempts such an issue from this savingsrequirement.
(Formerly: Acts 1973, P.L.28, SEC.1.) As amended by Acts 1982,P.L.28, SEC.2; P.L.23-1984, SEC.1.
IC 5-1-5-3
Exchange for outstanding bonds
Sec. 3. Any bonds issued for refunding purposes may be deliveredin exchange for the outstanding bonds being refunded or may be soldin the manner hereinafter provided.
(Formerly: Acts 1973, P.L.28, SEC.1.)
IC 5-1-5-4
Refunding procedure
Sec. 4. (a) Bonds may be refunded under this chapter when theholders thereof voluntarily surrender them for exchange or payment,or, if they mature, or are subject to redemption prior to maturitywithin twenty (20) years from the date of the refunding bonds. In anyadvance refunding plan under this chapter the governing body shallprovide in the ordinance authorizing the issuance of the advancerefunding bonds for the redemption of the bonds to be refunded onany redemption date prior to maturity or at maturity.
(b) The ordinance authorizing the issuance of advance refundingbonds pursuant to this chapter may provide for a maximum interestrate, payable annually or at shorter intervals, and shall provide forthe maturities at such time or times as may be determined by theordinance. The bonds may be made redeemable before maturity atthe option of the issuing body at such times and with such premiums,and under such terms and conditions as may be fixed in theordinance.
(c) The principal and interest of the bonds may be made payablein any lawful medium. The ordinance shall determine the form of thebonds, including the interest coupons if any to be attached thereto,and shall fix the denomination or denominations of the bonds and theplace or places of payment of the principal and interest thereof,which may be at any bank or trust company within or without thestate.
(d) Subject to registration provisions, all such bonds shall have allthe qualities and the incidents of negotiable instruments under thenegotiable instruments law of the state. The bonds shall be exemptfrom all taxation, state, county, and municipal, as provided inIC 6-8-5. Provision may be made for the registration of any of thebonds in the name of the owner as to principal alone, or as to both
principal and interest, but fully registered bonds shall be madeconvertible to coupon bonds at the option of the registered owner.The bonds shall be executed in the same manner as other bondsissued by the issuing body are executed.
(Formerly: Acts 1973, P.L.28, SEC.1.) As amended by P.L.23-1984,SEC.2.
IC 5-1-5-5
Principal amount; reserves to secure bonds
Sec. 5. Refunding bonds may be issued in a principal amount inexcess of the principal amount of the bonds to be refunded. Theprincipal amount of the refunding bonds may be less than or the sameas the principal amount of the bonds being refunded so long asprovision is duly and sufficiently made for the retirement orredemption of such bonds to be refunded. Any reserves held tosecure the bonds to be refunded may be applied at the time the bondsto be refunded are paid to the redemption or retirement of suchbonds, or if other available funds are sufficient and are used to retireand redeem such bonds, such reserves may be pledged as security forthe refunding bonds.
(Formerly: Acts 1973, P.L.28, SEC.1.)
IC 5-1-5-6
Proceeds of refunding bonds; disposition
Sec. 6. The proceeds of the refunding bonds issued pursuant tothis chapter shall be placed in escrow and applied, with any otheravailable funds, to the payment on the date selected for redemptionof the principal, accrued interest and any redemption premiums ofthe bonds being refunded, and, if so provided or permitted in theordinance authorizing the issuance of such refunding bonds or in thetrust indenture securing the same, may also be applied to the paymentof any interest on such refunding bonds, and any costs of refunding.Pending such application, such escrowed proceeds may be investedin direct obligations of, or obligations the principal of and theinterest on which are unconditionally guaranteed by the UnitedStates of America, which shall mature, or which shall be subject toredemption by the holder thereof at the option of such holder, notlater than the respective dates when the proceeds, together with theinterest accruing thereon, will be required for the purposes intended.In lieu of such investments, all or part of such proceeds may beplaced in interest bearing time certificates of deposits with sucheligible financial institutions in the state of Indiana as the governingbody shall determine or other similar arrangements may be madewith such eligible financial institutions with regard thereto whichwill assure that such proceeds, together with the interest accruingthereon, will be available when required for the purposes intended,provided that prior written approval of the Director of theDepartment of Financial Institutions shall be required whenever suchtime certificates of deposits or other similar arrangements shall besecured to the full amount thereof by direct obligations of, or
obligations the principal of and the interest on which areunconditionally guaranteed by, the United States of America of thetype permitted for direct investment of the escrow fund. All interestor other income earned on such investments shall first be used to paythe interest on the refunding bonds as it becomes due. Any excessshall become a part of and held in the escrow fund. Any balanceremaining in the escrow fund after redemption of all the bonds beingrefunded shall be deposited in the sinking fund after redemption ofall the bonds being refunded shall be deposited in the sinking fundestablished for the payment of the principal and interest on therefunding bonds.
(Formerly: Acts 1973, P.L.28, SEC.1; Acts 1974, P.L.12, SEC.1.)
IC 5-1-5-7
Safekeeping and application of bond proceeds
Sec. 7. The governing body may contract with respect to thesafekeeping and application of the advance refunding bond proceedsand other funds included therewith and the income therefrom. Thegoverning body may provide in the refunding plan that until suchmoneys are required to redeem or retire revenue bonds to berefunded, the refunding bond proceeds and other available funds, andthe income therefrom shall be used to pay and secure the payment ofthe principal of and interest on the advance refunding bonds. Thegoverning body may additionally pledge for the payment of suchrefunding bonds any revenues which might legally be pledged for thepayment of revenue bonds of the issuer of the type being refunded.Provisions must be made by the governing body for moneyssufficient in amount to accomplish the refunding as scheduled.
(Formerly: Acts 1973, P.L.28, SEC.1.)
IC 5-1-5-8
Trust indenture to secure bonds
Sec. 8. (a) The governing body may secure the bonds by a trustindenture by and between the issuing body and a corporate trustee,which may be any trust company or bank having the powers of a trustcompany within or outside of the state of Indiana, and may conveyor mortgage property to the same extent as is authorized by statutesapplicable to:
(1) the bonds being refunded; or
(2) the bonds that the bonds being refunded had previouslyrefunded.
(b) The ordinance authorizing the bonds and fixing the detailsthereof may provide that the trust indenture may contain suchprovisions for protecting and enforcing the rights and remedies of thebondholders as may be reasonable and proper, not in violation oflaw, including covenants setting forth the duties of the issuing body.
(c) The trust indenture may set forth the rights and remedies of thebondholders or trustee, restricting the individual right of action ofbondholders as is customary in trust indenture securing bonds anddebentures of corporations. Except as is in this chapter otherwise
provided, the governing body may provide by ordinance or in thetrust indenture for any other terms or conditions pertaining to therefunding bonds as is authorized by statutes applicable to:
(1) the bonds being refunded; or
(2) the bonds that the bonds being refunded had previouslyrefunded.
(Formerly: Acts 1973, P.L.28, SEC.1.) As amended by Acts 1982,P.L.28, SEC.3.
IC 5-1-5-9
Payment of bonds; sources of revenue
Sec. 9. When an issuing body has irrevocably set aside for andpledged to the payment of revenue bonds to be refunded, advancerefunding bond proceeds and other moneys in amounts whichtogether with known earned income from the investment thereof aresufficient in amount to pay the principal of and interest and anyredemption premiums on such revenue bonds as the same becomedue and to accomplish the refunding as scheduled, the governingbody may provide that the advance refunding revenue bonds shall bepayable from any source which, either at the time of the issuance ofthe advance refunding bonds or the revenue bonds to be refunded,might legally be or have been pledged for the payment of the revenuebonds refunded to the extent it may legally do so, notwithstandingthe pledge of such revenues for the payment of the outstandingrevenue bonds being refunded.
(Formerly: Acts 1973, P.L.28, SEC.1.)
IC 5-1-5-10
Irrevocable pledge to general obligation bond; effect
Sec. 10. When funds and investments and the known earnedincome therefrom in amounts sufficient to pay the principal of andinterest and any premium on bonds to be refunded as they becomedue at their respective maturities or at the date fixed for redemptionhave been irrevocably pledged to the bonds to be refunded, suchbonds shall not constitute an indebtedness of the issuing body withinthe meaning of any constitutional or statutory debt limitation.
(Formerly: Acts 1973, P.L.28, SEC.1.) As amended by P.L.44-1987,SEC.1.
IC 5-1-5-11
Issuance; separate or in combination
Sec. 11. Bonds for refunding and bonds for any other purpose orpurposes authorized may be issued separately or issued incombination in one (1) or more series or issues by the same issuer.
(Formerly: Acts 1973, P.L.28, SEC.1.)
IC 5-1-5-12
Law governing issuance
Sec. 12. Except as specifically provided in this chapter, refundingbonds issued under this chapter shall be issued in accordance with
the provisions of law applicable, either at the time of the issuance ofthe refunding bonds or at the time of issuance of the bonds to berefunded, to:
(1) the type of bonds being refunded; or
(2) the type of bonds that the bonds being refunded hadpreviously refunded.
(Formerly: Acts 1973, P.L.28, SEC.1.) As amended by Acts 1982,P.L.28, SEC.4.
IC 5-1-5-13
Sale of bonds
Sec. 13. Refunding bonds issued under the provisions of thischapter may be sold in such manner and upon such terms andconditions as the issuer of such refunding bonds shall deem to be inthe best interests of the issuing body, notwithstanding the provisionsof IC 21-32-3, nor the provisions of IC 5-1-11, nor the provisions ofany other law to the contrary. However, if such refunding bonds aresold to any person, limited liability company, firm, or corporationthat has been rendering financial advisory services to the issuingbody in connection with the proceedings and necessary fiscalarrangements related to such refunding bonds, then and in that eventthe issuing body shall not pay to such purchaser of the refundingbonds any fee or compensation for services rendered or asreimbursement for expenses incurred in connection therewith.
(Formerly: Acts 1973, P.L.28, SEC.1.) As amended by Acts 1981,P.L.11, SEC.15; P.L.8-1993, SEC.45; P.L.2-2007, SEC.67.
IC 5-1-5-14
Cumulative effect of chapter
Sec. 14. The authority of an issuing body to issue refunding bondspursuant to this chapter is additional to any existing authority to issuesuch bonds and nothing in this chapter shall prevent the issuance ofsuch bonds pursuant to any other law, and this chapter shall not beconstrued to amend any existing law authorizing the issuance ofrefunding bonds by an issuing body.
(Formerly: Acts 1973, P.L.28, SEC.1.)
IC 5-1-5-15
Lease modifications
Sec. 15. In connection with the issuance of refunding bonds, anissuing body and the lessee, or lessees, of any building, or buildings,financed from the proceeds of the bonds being refunded may enterinto an amendment to the lease modifying or amending theprovisions of such lease in any one (1) or more of the followingrespects:
(a) to provide for a reduction in the amount of lease rental payableby the lessee, or lessees, to be effective upon the redemption of thebonds being refunded; or the happening of the events set forth insection 9 of this chapter if permitted by law and the covenants on thebonds to be refunded; (b) to provide for extensions or reductions of the times set forthin the lease before the options of the lessee or lessees to purchasemay be exercised to such times as may be agreed upon between theissuing body and the lessee or lessees;
(c) to provide that the lease rental payable by the lessee or lessees,after the redemption of all the bonds being refunded may be payableto the trustee under a trust indenture securing such refunding bonds.
The refunding herein authorized shall in no way affect theobligation of the lessee or lessees to pay the lease rental under thelease of the building or buildings, except to the extent such leaserental may be reduced by any amendment as hereinbefore authorized.
(Formerly: Acts 1973, P.L.28, SEC.1.)
IC 5-1-5-16
Advance refunding bonds; issuance
Sec. 16. Notwithstanding any other law, advance refunding bondsmay be issued by an issuing body without obtaining the approval ofthe utility regulatory commission whether such advance refundingbonds are issued under this chapter or any other law.
As added by P.L.44-1987, SEC.2. Amended by P.L.23-1988, SEC.3.
IC 5-1-5-17
Last date for payment of certain refunding bonds
Sec. 17. (a) This section applies to bonds that are:
(1) issued after June 30, 2008, by a local issuing body; and
(2) payable from ad valorem property taxes, special benefittaxes on property, or tax increment revenues derived fromproperty taxes;
including bonds that are issued under a statute that permits the bondsto be issued without complying with any other law or otherwiseexpressly exempts the bonds from the requirements of this section.
(b) The last date permitted under an agreement for the payment ofprincipal and interest on bonds that are issued to retire or otherwiserefund other revenue bonds or general obligation bonds may notextend beyond the maximum term of the bonds being refunded.
As added by P.L.146-2008, SEC.24.
IC 5-1-5-18
Use of savings from refunding of bonds
Sec. 18. (a) This section applies to bonds that are:
(1) issued after June 30, 2008, by a local issuing body; and
(2) payable from ad valorem property taxes, special benefittaxes on property, or tax increment revenues derived fromproperty taxes;
including bonds that are issued under a statute that permits the bondsto be issued without complying with any other law or otherwiseexpressly exempts the bonds from the requirements of this section.
(b) Savings (as computed under section 2 of this chapter) thataccrue from the issuance of bonds to retire or otherwise refund otherbonds may be used only for the following purposes: (1) To maintain a debt service reserve fund for the refundingbonds at the level required under the terms of the refundingbonds, if the local issuing body adopts an ordinance, resolution,or order authorizing that use of the proceeds or earnings.
(2) To pay the principal or interest, or both, on:
(A) the refunding bonds; or
(B) other bonds, if the issuing body approves an ordinanceauthorizing the use of the savings to pay principal or intereston other bonds.
(3) To reduce the rate or amount of ad valorem property taxes,special benefit taxes on property, or tax increment revenuesimposed by or allocated to the local issuing body.
As added by P.L.146-2008, SEC.25.