• A regular meeting of members shall be held on a date, time, and with the frequency  stated in or fixed in accordance with the bylaws, but in any event in each year in  which directors are to be elected at that meeting for the purpose of conducting such  election, and to transact any other proper business which may be brought before the  meeting.

• The principal advantages of such bond financing are the low interest rates and the attractiveness of the debt to lenders and investors.
• Nonprofits commonly utilize bank letters of credit or other forms of “credit enhancement” such as bond insurance to back Bonds issued for their facilities.
• Bond counsel should be consulted to determine the sufficiency of an “official intent”.
• There is no downside to adopting an “official intent”, as it only preserves the possibility of using Bonds in the future.
• Replacement Funds and Fundraising. If Bonds finance facilities for which other funds were earmarked, these funds (as well as other School funds that secure repayment of the Bonds or having a sufficient “nexis” to the Bonds) may be subject to arbitrage yield restriction. This can occur when fundraising will be conducted in connection with the project. Bond counsel should be consulted early to ascertain whether such “replacement funds” are created.
• The average maturity of a 501(c)(3) Bond issue is limited by Federal law to 120% of the average reasonably expected economic life of the project financed.
• No more than 2% of the proceeds of a 501(c)(3) Bond may be used to pay costs associated with the issuance of the Bond. Any excess costs may be paid from other sources.
• In any event, a 501(c)(3) Bond must be issued within three years after the declaration of official intent and eighteen months after the later of the date a Project is acquired or placed in service.
• Nonprofit’s Control Over Project. Under any arrangement, loan, lease or sale, the Nonprofit normally is responsible for insurance, taxes and maintenance, has freedom with respect to design and construction, and may be regarded as the project “owner” for all practical purposes. During the term of the financing, the Nonprofit has essentially the same control over the project as under conventional financing. Furthermore, covenants and security devices usual in conventional lending normally can be incorporated in the Bond transaction.
• The bondholders look to the underlying obligation of the Nonprofit and any guaranties, mortgages, security instruments, insurance, letters of credit or other funds or credit enhancements that may be provided as arranged by the Nonprofit to pay the Bonds.
• “TEFRA” Hearing. Federal law requires that a public “TEFRA” hearing be held at least 14 days after the giving of published notice apprising the community of a proposed 501(c)(3) Bond and the nature and the location of the project. Following such public hearing, both the Issuer and an appropriate elected official or legislative body with jurisdiction over the project must approve the Bond.

• LIVING WITH A BOND ISSUE

   

  After Bonds are issued, there are only a few obligations of the Nonprofit that are different from a conventional loan. Principally, the Nonprofit must remain its 501(c)(3) status and the project must not be used by for-profit entities or operations. The Nonprofit must avoid arbitrage practices and pay arbitrage rebate if an exemption does not apply.

• BOND COUNSEL

   

  Counsel experienced in municipal bond law should be retained to serve as Bond Counsel. The function of Bond Counsel is to structure and document the transaction and to issue an opinion on the validity and tax status of the Bond. Fees of Bond Counsel are payable by the Nonprofit from Bond proceeds.

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