The loan obligation of a private academy and the bonds or notes issued to finance such loan pursuant to sections 10-289d to 10-289g, inclusive, shall be secured by all interest subsidy grants committed by the state to the private academy in connection with such financing. Whenever it is established that a qualifying municipality or private academy has defaulted in the payment of the principal or redemption premium or interest on its bonds or notes or on any payment obligation due under any loan agreement authorized by said sections 10-289d to 10-289g, inclusive, or any other event of default under any such loan agreement or guaranty agreement or the trust indenture for the bonds or notes occurs, the payment of interest subsidy grants to such qualifying municipality or private academy pursuant to any provision of the general statutes in effect at the time the default is established shall be withheld by the state. If the trustee, on behalf of a holder or owner of any such bond or note or such qualifying municipality or private academy, files with the State Comptroller a verified statement describing such default, the State Comptroller may investigate the circumstances of the alleged default, prepare and file in his office a certificate setting forth his finding with respect to the default and serve a copy of such finding, by registered or certified mail, upon the State Treasurer or chief fiscal officer of each such qualifying municipality and the private academy and the indenture trustee. Upon the filing of such a verified statement in the office of the State Comptroller, the State Comptroller shall deduct and withhold from all succeeding interest subsidy grant payments otherwise due each such qualifying municipality or private academy such amounts as are necessary to pay the interest on such bonds and notes of such a qualifying municipality until such time as the indenture trustee files a verified statement with the State Comptroller that all defaults have been cured. Payments of interest subsidy grants so deducted and withheld shall be forwarded promptly by the State Comptroller and the State Treasurer to the paying agent or agents for the bonds and notes for the sole purpose of payment of interest on such bonds or notes. The State Comptroller shall promptly notify the State Treasurer or the chief fiscal officer of each such qualifying municipality and the private academy of any payment or payments made to any paying agent or paying agents pursuant to this section. The state of Connecticut hereby covenants with the purchasers, holders and owners, from time to time, of bonds and notes issued by a qualifying municipality for school purposes that it will not limit or impair the rights and remedies granted by this section, provided nothing in this section shall be construed as requiring the state to continue the payment of state aid or assistance to any qualifying municipality or private academy or as limiting or prohibiting the state from repealing or amending any law relating to state aid or assistance, the manner and time of payment or apportionment thereof or the amount thereof.

(P.A. 97-265, S. 96, 98.)

History: P.A. 97-265 effective July 1, 1997.