15.2-2659 - Investigation by Governor of alleged defaults; withholding state funds from defaulting locality; payment of funds withheld; receipts, reports, etc.; magisterial and school district default - Virginia Statutes

§ 15.2-2659. Investigation by Governor of alleged defaults; withholding statefunds from defaulting locality; payment of funds withheld; receipts, reports,etc.; magisterial and school district defaults included.

Whenever it appears to the Governor from an affidavit filed with him by or onbehalf of the owner or owners of any general obligation bonds of anylocality, or by any paying agent for the bonds that the locality hasdefaulted in the payment of the principal of or premium, if any, or intereston any of its outstanding general obligation bonds, the Governor shallimmediately make a summary investigation into the facts set forth in theaffidavit.

If it is established to the satisfaction of the Governor that the locality isin default in the payment of its bonds or the interest on them, the Governorshall immediately make an order directing the Comptroller to withhold allfurther payment to the locality of all funds, or of any part of them,appropriated and payable by the Commonwealth to the locality for any and allpurposes, until the default is cured. The Governor shall, while the defaultcontinues, direct in writing the payment of all sums withheld by theComptroller, or as much of them as is necessary, to the owners of the bondsin default, or the paying agent for the bonds, so as to cure, or cure insofaras possible, the default as to the bonds or interest on them.

The Governor shall, as soon as practicable, give notice of the default and ofthe availability of funds with the paying agent or with the Comptroller bypublication one time in a daily newspaper of general circulation in the Cityof Richmond and in the case of registered bonds, by mail, to the registeredowners of the bonds. The cost of the publication and mailing shall be afurther charge against the funds in the hands of the Comptroller payable tothe locality. Any payment so made by the Comptroller to the owners of thebonds in default, or to the paying agent for the bonds, shall be credited asif made directly by the locality and shall be charged by the Comptrolleragainst the first appropriations otherwise payable to the locality as if paidto the locality. The owners of the bonds in default, or the paying agent forthe bonds, at the time of payment or at the time of each payment shallreceipt for the payment and deliver to the Comptroller all bonds and interestcoupons or assignments, in a form satisfactory to the Comptroller, of theright to receive the principal or interest satisfied by the payment. TheComptroller shall report each payment made to the governing body of thedefaulting locality and deliver or send by registered mail to the governingbody all bonds, interest coupons, and assignments received by the Comptrollerunder the provisions of this section.

If there is no paying agent for the bonds, the Comptroller shall hold for thebenefit of the owners of the bonds in default who do not present their bonds,coupons or assignments for payment their pro rata share of the amounts sowithheld and shall pay their share of such amounts when the bonds, coupons orassignments are presented.

For the purpose of this section, bonds of any magisterial district or schooldistrict of any county shall be treated as bonds of the county in which themagisterial district or school district is located.

Nothing in this section shall be construed to create any obligation on thepart of the Comptroller or the Commonwealth to make any payment on behalf ofthe defaulting locality other than from funds appropriated and payable to thedefaulting locality.

(Code 1950, § 15-666.66; 1958, c. 640; 1962, c. 623, § 15.1-225; 1964, c. 46;1971, Ex. Sess., c. 224; 1988, c. 210; 1991, c. 668, § 15.1-227.61; 1997, c.587.)