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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us) STATE OF MICHIGAN FRANK J. KELLEY, ATTORNEY GENERAL Opinion No. 6477 October 22, 1987 ADMINISTRATIVE BOARD, STATE: Determination of economic life of project leased STATE BUILDING AUTHORITY: Issuance of bonds repayable beyond life of asset The State Building Authority may not issue bonds that are repayable over a period extending one year beyond the economic life of the project, as determined by the State Administrative Board, to be financed by the proceeds of the bonds. Honorable Jack Welborn State Senator The Capitol Lansing, Michigan 48909 You have requested my opinion on whether the State Building Authority may issue bonds that are repayable over a period extending beyond the life of the asset being bonded. With regard to obligations issued by the State Building Authority, MCL 830.418(8); MSA 3.447(108)(8), provides, in pertinent part, that: "The obligations shall mature not more than 40 years from their date, and in any event not more than 1 year from the due date of the last true rental pledged for the payment of the obligations,...." MCL 830.411(e); MSA 3.447(101)(e), defines "true rental," in pertinent part, as follows: " 'True rental' means the rental required to be paid by the state to the building authority pursuant to any lease between the state and the building authority entered into pursuant to this act. The true rental shall be paid by the state to the building authority or its assignee periodically as specified in the lease with the building authority and shall be in periodic amounts as do not exceed the economic or market value to the state of the facilities to be leased. The economic or market value to the state of the facilities to be leased shall be determined by the state administrative board before the execution of any lease by the state under this act by an appraisal made by or for the state using those commonly employed procedures as will fairly determine economic or market value...." Before the execution of any lease by the state, the State Administrative Board, pursuant to an appraisal made by or for the state using commonly employed procedures as will fairly determine economic or market value, shall determine the market value of the project or the asset and its economic life. Therefore, the State Building Authority can only issue bonds that are repayable within one year from the due date of the last true rental pledged for the payment of the obligation, and the payment of true rental cannot be paid for periods of time after the project has lost its economic or market value to the state as determined by the State Administrative Board before the execution of the lease. It is my opinion, therefore, that the State Building Authority may not issue bonds that are repayable over a period extending one year beyond the economic life of the project, as determined by the State Administrative Board, to be financed by the proceeds of the bonds. Frank J. Kelley Attorney General
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