Sec. 05.09.01.07. Loan Terms, Limits, and Requirements

A. Interest Rate.

(1) The Administration shall establish or determine an interest rate or rates for the loans and corresponding local obligations, and other charges and fees, if any, that together with other moneys made available for those purposes, are sufficient to meet the interest payable by the Administration for its revenue bonds, notes, or other obligations financing the loans, and, in the discretion of the Administration, the administrative expenses of the Program.

(2) The interest rate or rates on loans may not exceed the maximum permitted by §103 of the Code.

B. Term.

(1) The term of each loan and corresponding local obligation shall be proposed initially by the local government, based upon existing market conditions for the financing of similar projects.

(2) Except as provided in §B(3) of this regulation, the term may not exceed the lesser of the useful life of the applicable project or 30 years, and the final term shall be at the discretion of the Administration, taking into consideration the applicable requirements of the indenture and of Article 31, §11, Annotated Code of Maryland.

(3) In the case of any county transportation facility financed by the Administration and secured by a pledge of a county's share of State highway user revenues, the term may not exceed 15 years.

(4) The final term shall be at the discretion of the Administration, taking into consideration the applicable requirements of the indenture and of Article 31, §11, Annotated Code of Maryland.

C. Maximum Loan Amount. Loans may be made in any amounts that are necessary to finance eligible costs of a project, but may not exceed 100 percent of the eligible costs of the project.

D. Prepayment. Loans, in most cases, may not be prepaid.

E. Repayment Agreement.

(1) The local government shall, at the option of the Administration, execute a repayment agreement in the form prepared by the Administration, by which the local government pledges its full faith and credit, or pledges other revenues and assets acceptable to the Administration, to the repayment of the loan.

(2) If required by the Administration, the obligations of the local government shall be evidenced by a local obligation, which shall:

(a) Constitute an indebtedness of and a charge against the general credit and taxing powers of the local government; and

(b) Include a covenant by the local government to levy upon all property within its jurisdiction taxes in rates and amounts sufficient to make all payments under the local obligation.

(3) Under the terms of a repayment agreement, the local government shall be required to make, or cause to be made, payments semiannually or at other times as selected by the Administration in accordance with the indenture.

F. Pledge Agreement.

(1) Except as provided in §G of this regulation, the local government shall execute a pledge agreement in a form prepared by the Administration, pledging all or a portion, at the discretion of the Administration, of State payments as security for the repayment agreement to be used by the Administration in the event of a default under the loan by the local government, and other documents evidencing and securing the loan, in forms prepared by the Administration.

(2) Under the pledge agreement, the local government shall authorize the Comptroller and Treasurer of Maryland to intercept State payments on behalf of the Administration in the event of a default under the loan.

(3) For a project from which revenue is intended to be generated, the local government may also be required to pledge this revenue to the Administration.

G. Participation Agreement.

(1) If the Administration finances a county transportation facility secured by a pledge of a county's share of State highway user revenues, the county shall execute a participation agreement meeting the requirements of this section, instead of the repayment and pledge agreements under E and F of this regulation.

(2) The participation agreement shall:

(a) Constitute a pledge of a county's share of State highway user revenues to the Administration in an amount sufficient to repay the Administration's revenue bonds, notes, or other obligations, with interest, in 15 years;

(b) Authorize the State Comptroller to withhold and deposit a county's share of State highway user revenues into a sinking fund maintained to pay the principal of and interest on the Administration's revenue bonds, notes, or other obligations due on the next payment date under the indenture;

(c) Require a county to use the proceeds of the Administration's bonds, notes, or other obligations solely for activities permitted by Transportation Article, 8-401-----8-413, Annotated Code of Maryland; and

(d) Describe any other terms of the financing required by the Administration.

H. Opinion of Counsel. The local government shall submit an opinion of counsel acceptable to the Administration, in form and substance satisfactory to counsel to the Administration, stating:

(1) That local government has full power and authority to incur the loan and to issue the local obligation;

(2) That local government has duly and validly entered into the loan and has duly and validly issued the local obligation, and the loan and the local obligation together with their related documents and instruments are legal, valid, and binding obligations of the local government in accordance with their terms;

(3) That the project conforms with applicable laws and regulations; and

(4) Any other matters required by the Administration or its counsel.